Correlation Between SPARTAN STORES and RELIANCE STEEL

Can any of the company-specific risk be diversified away by investing in both SPARTAN STORES and RELIANCE STEEL 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 SPARTAN STORES and RELIANCE STEEL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPARTAN STORES and RELIANCE STEEL AL, you can compare the effects of market volatilities on SPARTAN STORES and RELIANCE STEEL 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 SPARTAN STORES with a short position of RELIANCE STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPARTAN STORES and RELIANCE STEEL.

Diversification Opportunities for SPARTAN STORES and RELIANCE STEEL

0.18

Correlation Coefficient

SPARTAN STORES  RELIANCE STEEL

Average diversification

The 3 months correlation between SPARTAN and RELIANCE is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding SPARTAN STORES and RELIANCE STEEL AL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RELIANCE STEEL AL and SPARTAN STORES 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 SPARTAN STORES are associated (or correlated) with RELIANCE STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RELIANCE STEEL AL has no effect on the direction of SPARTAN STORES i.e., SPARTAN STORES and RELIANCE STEEL go up and down completely randomly.

Pair Corralation between SPARTAN STORES and RELIANCE STEEL

Assuming the 90 days trading horizon SPARTAN STORES is expected to generate 1.58 times more return on investment than RELIANCE STEEL. However, SPARTAN STORES is 1.58 times more volatile than RELIANCE STEEL AL. It trades about 0.07 of its potential returns per unit of risk. RELIANCE STEEL AL is currently generating about 0.08 per unit of risk. If you would invest  1,711  in SPARTAN STORES on December 29, 2024 and sell it today you would earn a total of  139.00  from holding SPARTAN STORES or generate 8.12% return on investment over 90 days.

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

SPARTAN STORES  vs.  RELIANCE STEEL AL

SPARTAN STORES

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPARTAN STORES are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward-looking indicators, SPARTAN STORES may actually be approaching a critical reversion point that can send shares even higher in April 2025.

RELIANCE STEEL AL

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RELIANCE STEEL AL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, RELIANCE STEEL may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SPARTAN STORES and RELIANCE STEEL

The main advantage of trading using opposite SPARTAN STORES and RELIANCE STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPARTAN STORES position performs unexpectedly, RELIANCE STEEL 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 RELIANCE STEEL will offset losses from the drop in RELIANCE STEEL's long position.

The idea behind SPARTAN STORES and RELIANCE STEEL AL 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.