Correlation Between Olympic Steel and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both Olympic Steel and Japan Tobacco 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 Japan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Olympic Steel and Japan Tobacco ADR, you can compare the effects of market volatilities on Olympic Steel and Japan Tobacco 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 Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olympic Steel and Japan Tobacco.
Diversification Opportunities for Olympic Steel and Japan Tobacco
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Olympic and Japan is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and Japan Tobacco ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco ADR 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 Japan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Tobacco ADR has no effect on the direction of Olympic Steel i.e., Olympic Steel and Japan Tobacco go up and down completely randomly.
Pair Corralation between Olympic Steel and Japan Tobacco
Given the investment horizon of 90 days Olympic Steel is expected to generate 2.31 times more return on investment than Japan Tobacco. However, Olympic Steel is 2.31 times more volatile than Japan Tobacco ADR. It trades about 0.03 of its potential returns per unit of risk. Japan Tobacco ADR is currently generating about 0.05 per unit of risk. If you would invest 3,358 in Olympic Steel on August 29, 2024 and sell it today you would earn a total of 793.00 from holding Olympic Steel or generate 23.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Olympic Steel vs. Japan Tobacco ADR
Performance |
| Timeline |
| Olympic Steel |
| Japan Tobacco ADR |
Olympic Steel and Japan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Olympic Steel and Japan Tobacco
The main advantage of trading using opposite Olympic Steel and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olympic Steel position performs unexpectedly, Japan Tobacco 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 Japan Tobacco will offset losses from the drop in Japan Tobacco's long position.The idea behind Olympic Steel and Japan Tobacco ADR 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.| Japan Tobacco vs. Imperial Brands PLC | Japan Tobacco vs. RLX Technology | Japan Tobacco vs. British American Tobacco | Japan Tobacco vs. Turning Point Brands |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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