Correlation Between Black Hills and Olympic Steel
Can any of the company-specific risk be diversified away by investing in both Black Hills and Olympic 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 Black Hills and Olympic Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Hills and Olympic Steel, you can compare the effects of market volatilities on Black Hills and Olympic 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 Black Hills with a short position of Olympic Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and Olympic Steel.
Diversification Opportunities for Black Hills and Olympic Steel
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Black and Olympic is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel and Black Hills 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 Black Hills are associated (or correlated) with Olympic Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olympic Steel has no effect on the direction of Black Hills i.e., Black Hills and Olympic Steel go up and down completely randomly.
Pair Corralation between Black Hills and Olympic Steel
Considering the 90-day investment horizon Black Hills is expected to generate 19.98 times less return on investment than Olympic Steel. But when comparing it to its historical volatility, Black Hills is 1.95 times less risky than Olympic Steel. It trades about 0.0 of its potential returns per unit of risk. Olympic Steel is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 3,255 in Olympic Steel on September 4, 2024 and sell it today you would earn a total of 1,028 from holding Olympic Steel or generate 31.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Black Hills vs. Olympic Steel
Performance |
| Timeline |
| Black Hills |
| Olympic Steel |
Black Hills and Olympic Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Hills and Olympic Steel
The main advantage of trading using opposite Black Hills and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills position performs unexpectedly, Olympic 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 Olympic Steel will offset losses from the drop in Olympic Steel's long position.| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills vs. Companhia Paranaense de |
| Olympic Steel vs. Constellium Nv | Olympic Steel vs. Century Aluminum | Olympic Steel vs. China Hongqiao Group | Olympic Steel vs. Kaiser Aluminum |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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