Correlation Between Qualys and Olympic Steel

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

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

Diversification Opportunities for Qualys and Olympic Steel

0.85

Correlation Coefficient

Qualys  Olympic Steel

Very poor diversification

The 3 months correlation between Qualys and Olympic is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Qualys Inc and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel and Qualys 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 Qualys Inc 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 Qualys i.e., Qualys and Olympic Steel go up and down completely randomly.

Pair Corralation between Qualys and Olympic Steel

Given the investment horizon of 90 days Qualys Inc is expected to generate 1.26 times more return on investment than Olympic Steel. However, Qualys is 1.26 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 0.03 per unit of risk. If you would invest  12,646  in Qualys Inc on September 15, 2024 and sell it today you would earn a total of  2,108  from holding Qualys Inc or generate 16.67% return on investment over 90 days.

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

Qualys Inc  vs.  Olympic Steel

Qualys Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Qualys Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Qualys unveiled solid returns over the last few months and may actually be approaching a breakup point.

Olympic Steel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Olympic Steel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Olympic Steel is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Qualys and Olympic Steel

The main advantage of trading using opposite Qualys and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qualys 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 Qualys Inc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.