Correlation Between Starbucks and Olympic Steel
Can any of the company-specific risk be diversified away by investing in both Starbucks 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 Starbucks and Olympic Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Starbucks and Olympic Steel, you can compare the effects of market volatilities on Starbucks 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 Starbucks with a short position of Olympic Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starbucks and Olympic Steel.
Diversification Opportunities for Starbucks and Olympic Steel
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Starbucks and Olympic is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel and Starbucks 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 Starbucks 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 Starbucks i.e., Starbucks and Olympic Steel go up and down completely randomly.
Pair Corralation between Starbucks and Olympic Steel
Given the investment horizon of 90 days Starbucks is expected to generate 3.13 times less return on investment than Olympic Steel. But when comparing it to its historical volatility, Starbucks is 1.39 times less risky than Olympic Steel. It trades about 0.01 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 3,265 in Olympic Steel on September 3, 2024 and sell it today you would earn a total of 963.00 from holding Olympic Steel or generate 29.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Starbucks vs. Olympic Steel
Performance |
| Timeline |
| Starbucks |
| Olympic Steel |
Starbucks and Olympic Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Starbucks and Olympic Steel
The main advantage of trading using opposite Starbucks and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks 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.| Starbucks vs. Highway Holdings Limited | Starbucks vs. QCR Holdings | Starbucks vs. Partner Communications | Starbucks vs. Acumen Pharmaceuticals |
| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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