Correlation Between Olympic Steel and 78454LAP5

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Can any of the company-specific risk be diversified away by investing in both Olympic Steel and 78454LAP5 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 78454LAP5 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Olympic Steel and SM ENERGY 6625, you can compare the effects of market volatilities on Olympic Steel and 78454LAP5 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 78454LAP5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olympic Steel and 78454LAP5.

Diversification Opportunities for Olympic Steel and 78454LAP5

0.16
  Correlation Coefficient

Average diversification

The 3 months correlation between Olympic and 78454LAP5 is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and SM ENERGY 6625 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM ENERGY 6625 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 78454LAP5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM ENERGY 6625 has no effect on the direction of Olympic Steel i.e., Olympic Steel and 78454LAP5 go up and down completely randomly.

Pair Corralation between Olympic Steel and 78454LAP5

Given the investment horizon of 90 days Olympic Steel is expected to under-perform the 78454LAP5. In addition to that, Olympic Steel is 6.35 times more volatile than SM ENERGY 6625. It trades about -0.02 of its total potential returns per unit of risk. SM ENERGY 6625 is currently generating about 0.02 per unit of volatility. If you would invest  9,469  in SM ENERGY 6625 on December 4, 2024 and sell it today you would earn a total of  252.00  from holding SM ENERGY 6625 or generate 2.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy97.98%
ValuesDaily Returns

Olympic Steel  vs.  SM ENERGY 6625

 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
SM ENERGY 6625 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days SM ENERGY 6625 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 78454LAP5 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Olympic Steel and 78454LAP5 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Olympic Steel and 78454LAP5

The main advantage of trading using opposite Olympic Steel and 78454LAP5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olympic Steel position performs unexpectedly, 78454LAP5 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 78454LAP5 will offset losses from the drop in 78454LAP5's long position.
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The idea behind Olympic Steel and SM ENERGY 6625 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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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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