Correlation Between Olympic Steel and Commercial Metals
Can any of the company-specific risk be diversified away by investing in both Olympic Steel and Commercial Metals 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 Commercial Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Olympic Steel and Commercial Metals, you can compare the effects of market volatilities on Olympic Steel and Commercial Metals 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 Commercial Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olympic Steel and Commercial Metals.
Diversification Opportunities for Olympic Steel and Commercial Metals
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Olympic and Commercial is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and Commercial Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial Metals 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 Commercial Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial Metals has no effect on the direction of Olympic Steel i.e., Olympic Steel and Commercial Metals go up and down completely randomly.
Pair Corralation between Olympic Steel and Commercial Metals
Given the investment horizon of 90 days Olympic Steel is expected to generate 1.07 times more return on investment than Commercial Metals. However, Olympic Steel is 1.07 times more volatile than Commercial Metals. It trades about 0.03 of its potential returns per unit of risk. Commercial Metals is currently generating about -0.05 per unit of risk. If you would invest 3,445 in Olympic Steel on November 1, 2024 and sell it today you would earn a total of 112.00 from holding Olympic Steel or generate 3.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Olympic Steel vs. Commercial Metals
Performance |
| Timeline |
| Olympic Steel |
| Commercial Metals |
Olympic Steel and Commercial Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Olympic Steel and Commercial Metals
The main advantage of trading using opposite Olympic Steel and Commercial Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olympic Steel position performs unexpectedly, Commercial Metals 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 Commercial Metals will offset losses from the drop in Commercial Metals' long position.| Olympic Steel vs. Universal Stainless Alloy | Olympic Steel vs. Outokumpu Oyj ADR | Olympic Steel vs. Usinas Siderurgicas de | Olympic Steel vs. POSCO Holdings |
| Commercial Metals vs. Olympic Steel | Commercial Metals vs. Steel Dynamics | Commercial Metals vs. Nucor Corp | Commercial Metals vs. Universal Stainless Alloy |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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