Correlation Between GPT and Reliance Steel

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

By analyzing existing cross correlation between GPT Group and Reliance Steel Aluminum, you can compare the effects of market volatilities on GPT 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 GPT with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of GPT and Reliance Steel.

Diversification Opportunities for GPT and Reliance Steel

0.88

Correlation Coefficient

GPT  Reliance Steel

Very poor diversification

The 3 months correlation between GPT and Reliance is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding GPT Group 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 GPT 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 GPT Group 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 GPT i.e., GPT and Reliance Steel go up and down completely randomly.

Pair Corralation between GPT and Reliance Steel

Assuming the 90 days horizon GPT is expected to generate 1.04 times less return on investment than Reliance Steel. In addition to that, GPT is 1.56 times more volatile than Reliance Steel Aluminum. It trades about 0.14 of its total potential returns per unit of risk. Reliance Steel Aluminum is currently generating about 0.22 per unit of volatility. If you would invest  23,455  in Reliance Steel Aluminum on April 20, 2025 and sell it today you would earn a total of  4,965  from holding Reliance Steel Aluminum or generate 21.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

GPT Group  vs.  Reliance Steel Aluminum

GPT Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GPT Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, GPT reported solid returns over the last few months and may actually be approaching a breakup point.

Reliance Steel Aluminum

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Reliance Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GPT and Reliance Steel

The main advantage of trading using opposite GPT and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GPT 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 GPT Group and Reliance Steel Aluminum 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.