Correlation Between Lennox International and Reliance Steel
Can any of the company-specific risk be diversified away by investing in both Lennox International 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 Lennox International and Reliance Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lennox International and Reliance Steel Aluminum, you can compare the effects of market volatilities on Lennox International 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 Lennox International with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lennox International and Reliance Steel.
Diversification Opportunities for Lennox International and Reliance Steel
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lennox and Reliance is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Lennox International 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 Lennox International 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 Lennox International 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 Lennox International i.e., Lennox International and Reliance Steel go up and down completely randomly.
Pair Corralation between Lennox International and Reliance Steel
Considering the 90-day investment horizon Lennox International is expected to generate 1.93 times more return on investment than Reliance Steel. However, Lennox International is 1.93 times more volatile than Reliance Steel Aluminum. It trades about -0.08 of its potential returns per unit of risk. Reliance Steel Aluminum is currently generating about -0.3 per unit of risk. If you would invest 48,298 in Lennox International on January 26, 2024 and sell it today you would lose (1,513) from holding Lennox International or give up 3.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lennox International vs. Reliance Steel Aluminum
Performance |
| Timeline |
| Lennox International |
| Reliance Steel Aluminum |
Lennox International and Reliance Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lennox International and Reliance Steel
The main advantage of trading using opposite Lennox International and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lennox International 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.| Lennox International vs. Johnson Controls International | Lennox International vs. Masco | Lennox International vs. Carlisle Companies Incorporated | Lennox International vs. Fortune Brands Innovations |
| Reliance Steel vs. Universal Stainless Alloy | Reliance Steel vs. Outokumpu Oyj ADR | Reliance Steel vs. Usinas Siderurgicas de | Reliance Steel vs. POSCO Holdings |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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