Correlation Between US Gold and Olympic Steel
Can any of the company-specific risk be diversified away by investing in both US 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 US 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 US Gold Corp and Olympic Steel, you can compare the effects of market volatilities on US 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 US Gold with a short position of Olympic Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Gold and Olympic Steel.
Diversification Opportunities for US Gold and Olympic Steel
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between USAU and Olympic is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding US Gold Corp and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel and US 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 US Gold Corp 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 US Gold i.e., US Gold and Olympic Steel go up and down completely randomly.
Pair Corralation between US Gold and Olympic Steel
Given the investment horizon of 90 days US Gold Corp is expected to under-perform the Olympic Steel. In addition to that, US Gold is 1.55 times more volatile than Olympic Steel. It trades about -0.16 of its total potential returns per unit of risk. Olympic Steel is currently generating about -0.07 per unit of volatility. If you would invest 4,012 in Olympic Steel on September 18, 2024 and sell it today you would lose (167.00) from holding Olympic Steel or give up 4.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Gold Corp vs. Olympic Steel
Performance |
| Timeline |
| US Gold Corp |
| Olympic Steel |
US Gold and Olympic Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Gold and Olympic Steel
The main advantage of trading using opposite US Gold and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US 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.| US Gold vs. Olympic Steel | US Gold vs. Steel Dynamics | US Gold vs. Commercial Metals | US Gold vs. Nucor Corp |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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