Correlation Between Olympic Steel and Tandy Leather
Can any of the company-specific risk be diversified away by investing in both Olympic Steel and Tandy Leather 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 Tandy Leather into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Olympic Steel and Tandy Leather Factory, you can compare the effects of market volatilities on Olympic Steel and Tandy Leather 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 Tandy Leather. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olympic Steel and Tandy Leather.
Diversification Opportunities for Olympic Steel and Tandy Leather
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Olympic and Tandy is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and Tandy Leather Factory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tandy Leather Factory 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 Tandy Leather. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tandy Leather Factory has no effect on the direction of Olympic Steel i.e., Olympic Steel and Tandy Leather go up and down completely randomly.
Pair Corralation between Olympic Steel and Tandy Leather
Given the investment horizon of 90 days Olympic Steel is expected to generate 1.23 times more return on investment than Tandy Leather. However, Olympic Steel is 1.23 times more volatile than Tandy Leather Factory. It trades about 0.04 of its potential returns per unit of risk. Tandy Leather Factory is currently generating about 0.02 per unit of risk. If you would invest 3,150 in Olympic Steel on September 12, 2024 and sell it today you would earn a total of 1,062 from holding Olympic Steel or generate 33.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Olympic Steel vs. Tandy Leather Factory
Performance |
| Timeline |
| Olympic Steel |
| Tandy Leather Factory |
Olympic Steel and Tandy Leather Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Olympic Steel and Tandy Leather
The main advantage of trading using opposite Olympic Steel and Tandy Leather positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olympic Steel position performs unexpectedly, Tandy Leather 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 Tandy Leather will offset losses from the drop in Tandy Leather's 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 |
| Tandy Leather vs. Green River Gold | Tandy Leather vs. Dixons Carphone plc | Tandy Leather vs. Ceconomy AG ADR | Tandy Leather vs. Winmark |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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