Correlation Between Olympic Steel and Apogee Enterprises

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

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

Diversification Opportunities for Olympic Steel and Apogee Enterprises

0.6

Correlation Coefficient

Olympic Steel  Apogee Enterprises

Poor diversification

The 3 months correlation between Olympic and Apogee is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and Apogee Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apogee Enterprises 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 Apogee Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apogee Enterprises has no effect on the direction of Olympic Steel i.e., Olympic Steel and Apogee Enterprises go up and down completely randomly.

Pair Corralation between Olympic Steel and Apogee Enterprises

Given the investment horizon of 90 days Olympic Steel is expected to generate 3.01 times less return on investment than Apogee Enterprises. But when comparing it to its historical volatility, Olympic Steel is 1.22 times less risky than Apogee Enterprises. It trades about 0.03 of its potential returns per unit of risk. Apogee Enterprises is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,666  in Apogee Enterprises on September 16, 2024 and sell it today you would earn a total of  1,014  from holding Apogee Enterprises or generate 15.21% return on investment over 90 days.

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

Olympic Steel  vs.  Apogee Enterprises

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.

Apogee Enterprises

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Olympic Steel and Apogee Enterprises

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

The idea behind Olympic Steel and Apogee Enterprises 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.