Correlation Between Olympic Steel and Synalloy

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

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

Diversification Opportunities for Olympic Steel and Synalloy

-0.03

Correlation Coefficient

Olympic Steel  Synalloy

Good diversification

The 3 months correlation between Olympic and Synalloy is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and Synalloy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synalloy 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 Synalloy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synalloy has no effect on the direction of Olympic Steel i.e., Olympic Steel and Synalloy go up and down completely randomly.

Pair Corralation between Olympic Steel and Synalloy

Given the investment horizon of 90 days Olympic Steel is expected to under-perform the Synalloy. In addition to that, Olympic Steel is 1.5 times more volatile than Synalloy. It trades about -0.43 of its total potential returns per unit of risk. Synalloy is currently generating about -0.06 per unit of volatility. If you would invest  1,150  in Synalloy on October 16, 2024 and sell it today you would lose (25.00) from holding Synalloy or give up 2.17% of portfolio value over 90 days.

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

Olympic Steel  vs.  Synalloy

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 unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Synalloy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Synalloy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Synalloy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Olympic Steel and Synalloy

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

The idea behind Olympic Steel and Synalloy 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.