Correlation Between Olympic Steel and Kumba Iron
Can any of the company-specific risk be diversified away by investing in both Olympic Steel and Kumba Iron 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 Kumba Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Olympic Steel and Kumba Iron Ore, you can compare the effects of market volatilities on Olympic Steel and Kumba Iron 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 Kumba Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olympic Steel and Kumba Iron.
Diversification Opportunities for Olympic Steel and Kumba Iron
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Olympic and Kumba is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and Kumba Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumba Iron Ore 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 Kumba Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumba Iron Ore has no effect on the direction of Olympic Steel i.e., Olympic Steel and Kumba Iron go up and down completely randomly.
Pair Corralation between Olympic Steel and Kumba Iron
Given the investment horizon of 90 days Olympic Steel is expected to generate 0.71 times more return on investment than Kumba Iron. However, Olympic Steel is 1.4 times less risky than Kumba Iron. It trades about 0.03 of its potential returns per unit of risk. Kumba Iron Ore is currently generating about 0.01 per unit of risk. If you would invest 3,454 in Olympic Steel on August 28, 2024 and sell it today you would earn a total of 848.00 from holding Olympic Steel or generate 24.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.79% |
| Values | Daily Returns |
Olympic Steel vs. Kumba Iron Ore
Performance |
| Timeline |
| Olympic Steel |
| Kumba Iron Ore |
Olympic Steel and Kumba Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Olympic Steel and Kumba Iron
The main advantage of trading using opposite Olympic Steel and Kumba Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olympic Steel position performs unexpectedly, Kumba Iron 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 Kumba Iron will offset losses from the drop in Kumba Iron's long position.The idea behind Olympic Steel and Kumba Iron Ore 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.| Kumba Iron vs. Labrador Iron Ore | Kumba Iron vs. Fortescue Metals Group | Kumba Iron vs. Fortescue Metals Group | Kumba Iron vs. Anhui Conch Cement |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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