Correlation Between Franco Nevada and Olympic Steel

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

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

Diversification Opportunities for Franco Nevada and Olympic Steel

-0.23

Correlation Coefficient

Franco Nevada  Olympic Steel

Very good diversification

The 3 months correlation between Franco and Olympic is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel and Franco Nevada 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 Franco Nevada 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 Franco Nevada i.e., Franco Nevada and Olympic Steel go up and down completely randomly.

Pair Corralation between Franco Nevada and Olympic Steel

Considering the 90-day investment horizon Franco Nevada is expected to generate 0.64 times more return on investment than Olympic Steel. However, Franco Nevada is 1.57 times less risky than Olympic Steel. It trades about 0.22 of its potential returns per unit of risk. Olympic Steel is currently generating about -0.02 per unit of risk. If you would invest  12,921  in Franco Nevada on November 28, 2024 and sell it today you would earn a total of  978.00  from holding Franco Nevada or generate 7.57% return on investment over 90 days.

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

Franco Nevada  vs.  Olympic Steel

Franco Nevada

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franco Nevada are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Franco Nevada showed solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with Franco Nevada and Olympic Steel

The main advantage of trading using opposite Franco Nevada and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franco Nevada 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 Franco Nevada 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.