Correlation Between Royal Gold and Olympic Steel
Can any of the company-specific risk be diversified away by investing in both Royal Gold 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 Royal Gold and Olympic Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Gold and Olympic Steel, you can compare the effects of market volatilities on Royal Gold 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 Royal Gold with a short position of Olympic Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Gold and Olympic Steel.
Diversification Opportunities for Royal Gold and Olympic Steel
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Royal and Olympic is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Royal Gold and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel and Royal Gold 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 Royal Gold 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 Royal Gold i.e., Royal Gold and Olympic Steel go up and down completely randomly.
Pair Corralation between Royal Gold and Olympic Steel
Given the investment horizon of 90 days Royal Gold is expected to generate 0.67 times more return on investment than Olympic Steel. However, Royal Gold is 1.48 times less risky than Olympic Steel. It trades about 0.07 of its potential returns per unit of risk. Olympic Steel is currently generating about -0.03 per unit of risk. If you would invest 10,766 in Royal Gold on November 28, 2024 and sell it today you would earn a total of 4,303 from holding Royal Gold or generate 39.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.69% |
| Values | Daily Returns |
Royal Gold vs. Olympic Steel
Performance |
| Timeline |
| Royal Gold |
| Olympic Steel |
Royal Gold and Olympic Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Gold and Olympic Steel
The main advantage of trading using opposite Royal Gold and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Gold 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.| Royal Gold vs. Wheaton Precious Metals | Royal Gold vs. Agnico Eagle Mines | Royal Gold vs. Sandstorm Gold Ltd | Royal Gold vs. Osisko Gold Ro |
| Olympic Steel vs. Outokumpu Oyj ADR | Olympic Steel vs. Usinas Siderurgicas de | Olympic Steel vs. POSCO Holdings | Olympic Steel vs. Steel Dynamics |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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