Correlation Between Rising Nonferrous and Olympic Circuit

Can any of the company-specific risk be diversified away by investing in both Rising Nonferrous and Olympic Circuit 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 Rising Nonferrous and Olympic Circuit into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rising Nonferrous Metals and Olympic Circuit Technology, you can compare the effects of market volatilities on Rising Nonferrous and Olympic Circuit 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 Rising Nonferrous with a short position of Olympic Circuit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rising Nonferrous and Olympic Circuit.

Diversification Opportunities for Rising Nonferrous and Olympic Circuit

0.64

Correlation Coefficient

Rising Nonferrous  Olympic Circuit

Poor diversification

The 3 months correlation between Rising and Olympic is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Rising Nonferrous Metals and Olympic Circuit Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Circuit Tech and Rising Nonferrous 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 Rising Nonferrous Metals are associated (or correlated) with Olympic Circuit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olympic Circuit Tech has no effect on the direction of Rising Nonferrous i.e., Rising Nonferrous and Olympic Circuit go up and down completely randomly.

Pair Corralation between Rising Nonferrous and Olympic Circuit

Assuming the 90 days trading horizon Rising Nonferrous Metals is expected to under-perform the Olympic Circuit. But the stock apears to be less risky and, when comparing its historical volatility, Rising Nonferrous Metals is 2.03 times less risky than Olympic Circuit. The stock trades about -0.31 of its potential returns per unit of risk. The Olympic Circuit Technology is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  3,262  in Olympic Circuit Technology on October 7, 2024 and sell it today you would lose (412.00) from holding Olympic Circuit Technology or give up 12.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Rising Nonferrous Metals  vs.  Olympic Circuit Technology

Rising Nonferrous Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rising Nonferrous Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Olympic Circuit Tech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Olympic Circuit Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Olympic Circuit may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Rising Nonferrous and Olympic Circuit

The main advantage of trading using opposite Rising Nonferrous and Olympic Circuit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rising Nonferrous position performs unexpectedly, Olympic Circuit 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 Olympic Circuit will offset losses from the drop in Olympic Circuit's long position.

The idea behind Rising Nonferrous Metals and Olympic Circuit Technology 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..