Correlation Between NEXANS ADR and Olympic Steel
Can any of the company-specific risk be diversified away by investing in both NEXANS ADR 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 NEXANS ADR and Olympic Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEXANS ADR EO and Olympic Steel, you can compare the effects of market volatilities on NEXANS ADR 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 NEXANS ADR with a short position of Olympic Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEXANS ADR and Olympic Steel.
Diversification Opportunities for NEXANS ADR and Olympic Steel
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NEXANS and Olympic is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding NEXANS ADR EO and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel and NEXANS ADR 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 NEXANS ADR EO 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 NEXANS ADR i.e., NEXANS ADR and Olympic Steel go up and down completely randomly.
Pair Corralation between NEXANS ADR and Olympic Steel
Assuming the 90 days trading horizon NEXANS ADR EO is expected to generate 0.99 times more return on investment than Olympic Steel. However, NEXANS ADR EO is 1.01 times less risky than Olympic Steel. It trades about 0.21 of its potential returns per unit of risk. Olympic Steel is currently generating about -0.18 per unit of risk. If you would invest 4,360 in NEXANS ADR EO on December 8, 2024 and sell it today you would earn a total of 600.00 from holding NEXANS ADR EO or generate 13.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NEXANS ADR EO vs. Olympic Steel
Performance |
| Timeline |
| NEXANS ADR EO |
| Olympic Steel |
NEXANS ADR and Olympic Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NEXANS ADR and Olympic Steel
The main advantage of trading using opposite NEXANS ADR and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEXANS ADR 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.| NEXANS ADR vs. ONWARD MEDICAL BV | ||
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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