Correlation Between Olympic Steel and CIGNA

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Can any of the company-specific risk be diversified away by investing in both Olympic Steel and CIGNA 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 CIGNA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Olympic Steel and CIGNA P, you can compare the effects of market volatilities on Olympic Steel and CIGNA 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 CIGNA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olympic Steel and CIGNA.

Diversification Opportunities for Olympic Steel and CIGNA

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between Olympic and CIGNA is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and CIGNA P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIGNA P 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 CIGNA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIGNA P has no effect on the direction of Olympic Steel i.e., Olympic Steel and CIGNA go up and down completely randomly.

Pair Corralation between Olympic Steel and CIGNA

Given the investment horizon of 90 days Olympic Steel is expected to under-perform the CIGNA. In addition to that, Olympic Steel is 8.96 times more volatile than CIGNA P. It trades about -0.02 of its total potential returns per unit of risk. CIGNA P is currently generating about 0.01 per unit of volatility. If you would invest  9,825  in CIGNA P on November 29, 2024 and sell it today you would earn a total of  80.00  from holding CIGNA P or generate 0.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.39%
ValuesDaily Returns

Olympic Steel  vs.  CIGNA P

 Performance 
       Timeline  
Olympic Steel 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Olympic Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
CIGNA P 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days CIGNA P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CIGNA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Olympic Steel and CIGNA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Olympic Steel and CIGNA

The main advantage of trading using opposite Olympic Steel and CIGNA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olympic Steel position performs unexpectedly, CIGNA 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 CIGNA will offset losses from the drop in CIGNA's long position.
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The idea behind Olympic Steel and CIGNA P 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.
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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