Correlation Between Old Republic and Olympic Steel
Can any of the company-specific risk be diversified away by investing in both Old Republic 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 Old Republic and Olympic Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Old Republic International and Olympic Steel, you can compare the effects of market volatilities on Old Republic 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 Old Republic with a short position of Olympic Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Republic and Olympic Steel.
Diversification Opportunities for Old Republic and Olympic Steel
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Old and Olympic is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Old Republic International and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel and Old Republic 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 Old Republic International 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 Old Republic i.e., Old Republic and Olympic Steel go up and down completely randomly.
Pair Corralation between Old Republic and Olympic Steel
Considering the 90-day investment horizon Old Republic is expected to generate 1.63 times less return on investment than Olympic Steel. But when comparing it to its historical volatility, Old Republic International is 3.15 times less risky than Olympic Steel. It trades about 0.4 of its potential returns per unit of risk. Olympic Steel is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3,638 in Olympic Steel on August 31, 2024 and sell it today you would earn a total of 593.00 from holding Olympic Steel or generate 16.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Old Republic International vs. Olympic Steel
Performance |
| Timeline |
| Old Republic Interna |
| Olympic Steel |
Old Republic and Olympic Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Old Republic and Olympic Steel
The main advantage of trading using opposite Old Republic and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Republic 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.| Old Republic vs. American International Group | Old Republic vs. Hartford Financial Services | Old Republic vs. Goosehead Insurance | Old Republic vs. Enstar Group Limited |
| Olympic Steel vs. Universal Stainless Alloy | Olympic Steel vs. Outokumpu Oyj ADR | Olympic Steel vs. Usinas Siderurgicas de | Olympic 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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