Correlation Between Olympic Steel and Park Ohio
Can any of the company-specific risk be diversified away by investing in both Olympic Steel and Park Ohio 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 Park Ohio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Olympic Steel and Park Ohio Holdings, you can compare the effects of market volatilities on Olympic Steel and Park Ohio 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 Park Ohio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olympic Steel and Park Ohio.
Diversification Opportunities for Olympic Steel and Park Ohio
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Olympic and Park is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and Park Ohio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Ohio Holdings 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 Park Ohio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Ohio Holdings has no effect on the direction of Olympic Steel i.e., Olympic Steel and Park Ohio go up and down completely randomly.
Pair Corralation between Olympic Steel and Park Ohio
Given the investment horizon of 90 days Olympic Steel is expected to generate 1.09 times more return on investment than Park Ohio. However, Olympic Steel is 1.09 times more volatile than Park Ohio Holdings. It trades about 0.06 of its potential returns per unit of risk. Park Ohio Holdings is currently generating about 0.06 per unit of risk. If you would invest 3,984 in Olympic Steel on August 28, 2024 and sell it today you would earn a total of 318.00 from holding Olympic Steel or generate 7.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Olympic Steel vs. Park Ohio Holdings
Performance |
| Timeline |
| Olympic Steel |
| Park Ohio Holdings |
Olympic Steel and Park Ohio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Olympic Steel and Park Ohio
The main advantage of trading using opposite Olympic Steel and Park Ohio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olympic Steel position performs unexpectedly, Park Ohio 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 Park Ohio will offset losses from the drop in Park Ohio's long position.The idea behind Olympic Steel and Park Ohio Holdings 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.| Park Ohio vs. Aquagold International | Park Ohio vs. Morningstar Unconstrained Allocation | Park Ohio vs. High Yield Municipal Fund | Park Ohio vs. Thrivent High Yield |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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