Correlation Between Reliance Steel and ARISTOCRAT LEISURE

Can any of the company-specific risk be diversified away by investing in both Reliance Steel and ARISTOCRAT LEISURE at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Reliance Steel and ARISTOCRAT LEISURE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Reliance Steel Aluminum and ARISTOCRAT LEISURE, you can compare the effects of market volatilities on Reliance Steel and ARISTOCRAT LEISURE and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Reliance Steel with a short position of ARISTOCRAT LEISURE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and ARISTOCRAT LEISURE.

Diversification Opportunities for Reliance Steel and ARISTOCRAT LEISURE

-0.02

Correlation Coefficient

Reliance Steel  ARISTOCRAT LEISURE

Good diversification

The 3 months correlation between Reliance and ARISTOCRAT is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and ARISTOCRAT LEISURE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARISTOCRAT LEISURE and Reliance Steel is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Reliance Steel Aluminum are associated (or correlated) with ARISTOCRAT LEISURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARISTOCRAT LEISURE has no effect on the direction of Reliance Steel i.e., Reliance Steel and ARISTOCRAT LEISURE go up and down completely randomly.

Pair Corralation between Reliance Steel and ARISTOCRAT LEISURE

Assuming the 90 days horizon Reliance Steel Aluminum is expected to under-perform the ARISTOCRAT LEISURE. In addition to that, Reliance Steel is 1.07 times more volatile than ARISTOCRAT LEISURE. It trades about -0.08 of its total potential returns per unit of risk. ARISTOCRAT LEISURE is currently generating about 0.1 per unit of volatility. If you would invest  4,160  in ARISTOCRAT LEISURE on November 29, 2024 and sell it today you would earn a total of  320.00  from holding ARISTOCRAT LEISURE or generate 7.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Reliance Steel Aluminum  vs.  ARISTOCRAT LEISURE

Reliance Steel Aluminum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reliance Steel Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ARISTOCRAT LEISURE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ARISTOCRAT LEISURE may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Reliance Steel and ARISTOCRAT LEISURE

The main advantage of trading using opposite Reliance Steel and ARISTOCRAT LEISURE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, ARISTOCRAT LEISURE can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ARISTOCRAT LEISURE will offset losses from the drop in ARISTOCRAT LEISURE's long position.

The idea behind Reliance Steel Aluminum and ARISTOCRAT LEISURE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.