Correlation Between Shoprite Holdings and Reliance Steel
Can any of the company-specific risk be diversified away by investing in both Shoprite Holdings 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 Shoprite Holdings and Reliance Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shoprite Holdings Limited and Reliance Steel Aluminum, you can compare the effects of market volatilities on Shoprite Holdings 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 Shoprite Holdings with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shoprite Holdings and Reliance Steel.
Diversification Opportunities for Shoprite Holdings and Reliance Steel
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shoprite and Reliance is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings Limited and Reliance Steel Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Steel Aluminum and Shoprite Holdings 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 Shoprite Holdings Limited 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 Aluminum has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and Reliance Steel go up and down completely randomly.
Pair Corralation between Shoprite Holdings and Reliance Steel
Assuming the 90 days horizon Shoprite Holdings Limited is expected to under-perform the Reliance Steel. But the stock apears to be less risky and, when comparing its historical volatility, Shoprite Holdings Limited is 1.75 times less risky than Reliance Steel. The stock trades about -0.01 of its potential returns per unit of risk. The Reliance Steel Aluminum is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 26,491 in Reliance Steel Aluminum on September 1, 2024 and sell it today you would earn a total of 3,989 from holding Reliance Steel Aluminum or generate 15.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Shoprite Holdings Limited vs. Reliance Steel Aluminum
Performance |
| Timeline |
| Shoprite Holdings |
| Reliance Steel Aluminum |
Shoprite Holdings and Reliance Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shoprite Holdings and Reliance Steel
The main advantage of trading using opposite Shoprite Holdings and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shoprite Holdings 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.| Shoprite Holdings vs. AIR PRODCHEMICALS | Shoprite Holdings vs. PTT Global Chemical | Shoprite Holdings vs. Silicon Motion Technology | Shoprite Holdings vs. BRIT AMER TOBACCO |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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