Correlation Between Leggett Platt and Reliance Steel
Can any of the company-specific risk be diversified away by investing in both Leggett Platt 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 Leggett Platt and Reliance Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leggett Platt Incorporated and Reliance Steel Aluminum, you can compare the effects of market volatilities on Leggett Platt 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 Leggett Platt with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leggett Platt and Reliance Steel.
Diversification Opportunities for Leggett Platt and Reliance Steel
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Leggett and Reliance is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Leggett Platt Incorporated 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 Leggett Platt 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 Leggett Platt Incorporated 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 Leggett Platt i.e., Leggett Platt and Reliance Steel go up and down completely randomly.
Pair Corralation between Leggett Platt and Reliance Steel
Assuming the 90 days horizon Leggett Platt Incorporated is expected to under-perform the Reliance Steel. In addition to that, Leggett Platt is 1.86 times more volatile than Reliance Steel Aluminum. It trades about -0.05 of its total potential returns per unit of risk. Reliance Steel Aluminum is currently generating about 0.04 per unit of volatility. If you would invest 24,411 in Reliance Steel Aluminum on September 15, 2024 and sell it today you would earn a total of 4,639 from holding Reliance Steel Aluminum or generate 19.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leggett Platt Incorporated vs. Reliance Steel Aluminum
Performance |
| Timeline |
| Leggett Platt |
| Reliance Steel Aluminum |
Leggett Platt and Reliance Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leggett Platt and Reliance Steel
The main advantage of trading using opposite Leggett Platt and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leggett Platt 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.| Leggett Platt vs. Superior Plus Corp | Leggett Platt vs. SIVERS SEMICONDUCTORS AB | Leggett Platt vs. NorAm Drilling AS | Leggett Platt vs. Norsk Hydro ASA |
| Reliance Steel vs. Scandinavian Tobacco Group | Reliance Steel vs. NorAm Drilling AS | Reliance Steel vs. Park Hotels Resorts | Reliance Steel vs. InterContinental Hotels Group |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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