Correlation Between Olympic Steel and ChampionX
Can any of the company-specific risk be diversified away by investing in both Olympic Steel and ChampionX 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 Olympic Steel and ChampionX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Olympic Steel and ChampionX, you can compare the effects of market volatilities on Olympic Steel and ChampionX 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 Olympic Steel with a short position of ChampionX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olympic Steel and ChampionX.
Diversification Opportunities for Olympic Steel and ChampionX
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Olympic and ChampionX is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and ChampionX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChampionX and Olympic Steel 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 Olympic Steel are associated (or correlated) with ChampionX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChampionX has no effect on the direction of Olympic Steel i.e., Olympic Steel and ChampionX go up and down completely randomly.
Pair Corralation between Olympic Steel and ChampionX
Given the investment horizon of 90 days Olympic Steel is expected to generate 1.27 times more return on investment than ChampionX. However, Olympic Steel is 1.27 times more volatile than ChampionX. It trades about 0.03 of its potential returns per unit of risk. ChampionX is currently generating about 0.01 per unit of risk. If you would invest 3,283 in Olympic Steel on September 20, 2024 and sell it today you would earn a total of 562.00 from holding Olympic Steel or generate 17.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Olympic Steel vs. ChampionX
Performance |
| Timeline |
| Olympic Steel |
| ChampionX |
Olympic Steel and ChampionX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Olympic Steel and ChampionX
The main advantage of trading using opposite Olympic Steel and ChampionX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olympic Steel position performs unexpectedly, ChampionX 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 ChampionX will offset losses from the drop in ChampionX's long position.The idea behind Olympic Steel and ChampionX 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.| ChampionX vs. Expro Group Holdings | ChampionX vs. Ranger Energy Services | ChampionX vs. Cactus Inc | ChampionX vs. MRC Global |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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