Correlation Between National Beverage and Olympic Steel

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

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

Diversification Opportunities for National Beverage and Olympic Steel

0.72

Correlation Coefficient

National Beverage  Olympic Steel

Poor diversification

The 3 months correlation between National and Olympic is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel and National Beverage 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 National Beverage Corp 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 National Beverage i.e., National Beverage and Olympic Steel go up and down completely randomly.

Pair Corralation between National Beverage and Olympic Steel

Given the investment horizon of 90 days National Beverage is expected to generate 1.78 times less return on investment than Olympic Steel. But when comparing it to its historical volatility, National Beverage Corp is 1.71 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 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,846  in Olympic Steel on September 13, 2024 and sell it today you would earn a total of  328.00  from holding Olympic Steel or generate 8.53% return on investment over 90 days.

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

National Beverage Corp  vs.  Olympic Steel

National Beverage Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, National Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Olympic Steel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Olympic Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Olympic Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with National Beverage and Olympic Steel

The main advantage of trading using opposite National Beverage and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage 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 National Beverage Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.