Correlation Between Barings BDC and Olympic Steel

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

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

Diversification Opportunities for Barings BDC and Olympic Steel

0.6

Correlation Coefficient

Barings BDC  Olympic Steel

Poor diversification

The 3 months correlation between Barings and Olympic is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Barings BDC and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel and Barings BDC 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 Barings BDC are associated (or correlated) with Olympic Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olympic Steel has no effect on the direction of Barings BDC i.e., Barings BDC and Olympic Steel go up and down completely randomly.

Pair Corralation between Barings BDC and Olympic Steel

Given the investment horizon of 90 days Barings BDC is expected to generate 0.43 times more return on investment than Olympic Steel. However, Barings BDC is 2.31 times less risky than Olympic Steel. It trades about 0.06 of its potential returns per unit of risk. Olympic Steel is currently generating about -0.01 per unit of risk. If you would invest  693.00  in Barings BDC on October 12, 2024 and sell it today you would earn a total of  245.00  from holding Barings BDC or generate 35.35% return on investment over 90 days.

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

Barings BDC  vs.  Olympic Steel

Barings BDC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barings BDC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Olympic Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Barings BDC and Olympic Steel

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

The idea behind Barings BDC and Olympic Steel 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.