Correlation Between Universal Stainless and Olympic Steel
Can any of the company-specific risk be diversified away by investing in both Universal Stainless 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 Universal Stainless and Olympic Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Stainless Alloy and Olympic Steel, you can compare the effects of market volatilities on Universal Stainless 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 Universal Stainless with a short position of Olympic Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Stainless and Olympic Steel.
Diversification Opportunities for Universal Stainless and Olympic Steel
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Universal and Olympic is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Universal Stainless Alloy and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel and Universal Stainless 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 Universal Stainless Alloy 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 Universal Stainless i.e., Universal Stainless and Olympic Steel go up and down completely randomly.
Pair Corralation between Universal Stainless and Olympic Steel
Given the investment horizon of 90 days Universal Stainless Alloy is expected to generate 1.34 times more return on investment than Olympic Steel. However, Universal Stainless is 1.34 times more volatile than Olympic Steel. It trades about 0.13 of its potential returns per unit of risk. Olympic Steel is currently generating about -0.08 per unit of risk. If you would invest 2,039 in Universal Stainless Alloy on August 27, 2024 and sell it today you would earn a total of 2,388 from holding Universal Stainless Alloy or generate 117.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Stainless Alloy vs. Olympic Steel
Performance |
| Timeline |
| Universal Stainless Alloy |
| Olympic Steel |
Universal Stainless and Olympic Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Stainless and Olympic Steel
The main advantage of trading using opposite Universal Stainless and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Stainless 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.The idea behind Universal Stainless Alloy and Olympic Steel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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