Correlation Between Olympic Steel and GILEAD

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

Diversification Opportunities for Olympic Steel and GILEAD

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between Olympic and GILEAD is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and GILEAD SCIENCES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GILEAD SCIENCES INC 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 GILEAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GILEAD SCIENCES INC has no effect on the direction of Olympic Steel i.e., Olympic Steel and GILEAD go up and down completely randomly.

Pair Corralation between Olympic Steel and GILEAD

Given the investment horizon of 90 days Olympic Steel is expected to generate 8.31 times more return on investment than GILEAD. However, Olympic Steel is 8.31 times more volatile than GILEAD SCIENCES INC. It trades about 0.27 of its potential returns per unit of risk. GILEAD SCIENCES INC is currently generating about 0.01 per unit of risk. If you would invest  3,524  in Olympic Steel on September 3, 2024 and sell it today you would earn a total of  704.00  from holding Olympic Steel or generate 19.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy90.0%
ValuesDaily Returns

Olympic Steel  vs.  GILEAD SCIENCES INC

 Performance 
       Timeline  
Olympic Steel 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Olympic Steel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Olympic Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.
GILEAD SCIENCES INC 

Risk-Adjusted Performance

0 of 100

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

Olympic Steel and GILEAD Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Olympic Steel and GILEAD

The main advantage of trading using opposite Olympic Steel and GILEAD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olympic Steel position performs unexpectedly, GILEAD 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 GILEAD will offset losses from the drop in GILEAD's long position.
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The idea behind Olympic Steel and GILEAD SCIENCES INC 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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