Correlation Between Olympic Steel and SALESFORCE INC

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

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

Diversification Opportunities for Olympic Steel and SALESFORCE INC

0.39

Correlation Coefficient

Olympic Steel  SALESFORCE INC

Weak diversification

The 3 months correlation between Olympic and SALESFORCE is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and SALESFORCE INC CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SALESFORCE INC CDR and Olympic Steel 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 Olympic Steel are associated (or correlated) with SALESFORCE INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SALESFORCE INC CDR has no effect on the direction of Olympic Steel i.e., Olympic Steel and SALESFORCE INC go up and down completely randomly.

Pair Corralation between Olympic Steel and SALESFORCE INC

Assuming the 90 days trading horizon Olympic Steel is expected to under-perform the SALESFORCE INC. But the stock apears to be less risky and, when comparing its historical volatility, Olympic Steel is 1.12 times less risky than SALESFORCE INC. The stock trades about -0.01 of its potential returns per unit of risk. The SALESFORCE INC CDR is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,497  in SALESFORCE INC CDR on October 24, 2024 and sell it today you would earn a total of  193.00  from holding SALESFORCE INC CDR or generate 12.89% return on investment over 90 days.

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

Olympic Steel  vs.  SALESFORCE INC CDR

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 comparatively stable basic indicators, Olympic Steel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SALESFORCE INC CDR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SALESFORCE INC CDR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SALESFORCE INC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Olympic Steel and SALESFORCE INC

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

The idea behind Olympic Steel and SALESFORCE INC CDR 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.