Correlation Between Contango ORE and Olympic Steel

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

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

Diversification Opportunities for Contango ORE and Olympic Steel

0.68

Correlation Coefficient

Contango ORE  Olympic Steel

Poor diversification

The 3 months correlation between Contango and Olympic is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Contango ORE and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel and Contango ORE 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 Contango ORE 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 Contango ORE i.e., Contango ORE and Olympic Steel go up and down completely randomly.

Pair Corralation between Contango ORE and Olympic Steel

Given the investment horizon of 90 days Contango ORE is expected to generate 1.38 times more return on investment than Olympic Steel. However, Contango ORE is 1.38 times more volatile than Olympic Steel. It trades about -0.08 of its potential returns per unit of risk. Olympic Steel is currently generating about -0.17 per unit of risk. If you would invest  1,214  in Contango ORE on December 4, 2024 and sell it today you would lose (244.00) from holding Contango ORE or give up 20.1% of portfolio value over 90 days.

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

Contango ORE  vs.  Olympic Steel

Contango ORE

Risk-Adjusted Performance

Very Weak

Over the last 90 days Contango ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Olympic Steel

Risk-Adjusted Performance

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

Pair Trading with Contango ORE and Olympic Steel

The main advantage of trading using opposite Contango ORE and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Contango ORE 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 Contango ORE 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.