Correlation Between Consol Energy and Olympic Steel
Can any of the company-specific risk be diversified away by investing in both Consol Energy 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 Consol Energy and Olympic Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consol Energy and Olympic Steel, you can compare the effects of market volatilities on Consol Energy 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 Consol Energy with a short position of Olympic Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consol Energy and Olympic Steel.
Diversification Opportunities for Consol Energy and Olympic Steel
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Consol and Olympic is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel and Consol Energy 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 Consol Energy 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 Consol Energy i.e., Consol Energy and Olympic Steel go up and down completely randomly.
Pair Corralation between Consol Energy and Olympic Steel
Given the investment horizon of 90 days Consol Energy is expected to generate 1.01 times less return on investment than Olympic Steel. But when comparing it to its historical volatility, Consol Energy is 1.17 times less risky than Olympic Steel. It trades about 0.27 of its potential returns per unit of risk. Olympic Steel is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 3,588 in Olympic Steel on September 1, 2024 and sell it today you would earn a total of 640.00 from holding Olympic Steel or generate 17.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consol Energy vs. Olympic Steel
Performance |
| Timeline |
| Consol Energy |
| Olympic Steel |
Consol Energy and Olympic Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consol Energy and Olympic Steel
The main advantage of trading using opposite Consol Energy and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consol Energy 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.| Consol Energy vs. Alliance Resource Partners | Consol Energy vs. Natural Resource Partners | Consol Energy vs. Hallador Energy | Consol Energy vs. NACCO Industries |
| Olympic Steel vs. Fortitude Gold Corp | Olympic Steel vs. New Gold | Olympic Steel vs. Galiano Gold | Olympic Steel vs. GoldMining |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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