Correlation Between Olympic Steel and Starbucks
Can any of the company-specific risk be diversified away by investing in both Olympic Steel and Starbucks 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 Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Olympic Steel and Starbucks, you can compare the effects of market volatilities on Olympic Steel and Starbucks 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 Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olympic Steel and Starbucks.
Diversification Opportunities for Olympic Steel and Starbucks
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Olympic and Starbucks is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks 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 Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of Olympic Steel i.e., Olympic Steel and Starbucks go up and down completely randomly.
Pair Corralation between Olympic Steel and Starbucks
Given the investment horizon of 90 days Olympic Steel is expected to generate 1.39 times more return on investment than Starbucks. However, Olympic Steel is 1.39 times more volatile than Starbucks. It trades about 0.03 of its potential returns per unit of risk. Starbucks is currently generating about 0.01 per unit of risk. If you would invest 3,265 in Olympic Steel on September 3, 2024 and sell it today you would earn a total of 963.00 from holding Olympic Steel or generate 29.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Olympic Steel vs. Starbucks
Performance |
| Timeline |
| Olympic Steel |
| Starbucks |
Olympic Steel and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Olympic Steel and Starbucks
The main advantage of trading using opposite Olympic Steel and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olympic Steel position performs unexpectedly, Starbucks 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 Starbucks will offset losses from the drop in Starbucks' 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 |
| Starbucks vs. Highway Holdings Limited | Starbucks vs. QCR Holdings | Starbucks vs. Partner Communications | Starbucks vs. Acumen Pharmaceuticals |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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