Correlation Between Olympic Steel and Algoma Steel
Can any of the company-specific risk be diversified away by investing in both Olympic Steel and Algoma 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 Olympic Steel and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Olympic Steel and Algoma Steel Group, you can compare the effects of market volatilities on Olympic Steel and Algoma 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 Olympic Steel with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olympic Steel and Algoma Steel.
Diversification Opportunities for Olympic Steel and Algoma Steel
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Olympic and Algoma is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and Algoma Steel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algoma Steel Group 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 Algoma Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algoma Steel Group has no effect on the direction of Olympic Steel i.e., Olympic Steel and Algoma Steel go up and down completely randomly.
Pair Corralation between Olympic Steel and Algoma Steel
Given the investment horizon of 90 days Olympic Steel is expected to under-perform the Algoma Steel. In addition to that, Olympic Steel is 1.07 times more volatile than Algoma Steel Group. It trades about -0.04 of its total potential returns per unit of risk. Algoma Steel Group is currently generating about 0.01 per unit of volatility. If you would invest 701.00 in Algoma Steel Group on December 3, 2024 and sell it today you would lose (21.00) from holding Algoma Steel Group or give up 3.0% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Olympic Steel vs. Algoma Steel Group
Performance |
Timeline |
Olympic Steel |
Algoma Steel Group |
Olympic Steel and Algoma Steel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Olympic Steel and Algoma Steel
The main advantage of trading using opposite Olympic Steel and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olympic Steel position performs unexpectedly, Algoma 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 Algoma Steel will offset losses from the drop in Algoma Steel's long position.Olympic Steel vs. Outokumpu Oyj ADR | Olympic Steel vs. Usinas Siderurgicas de | Olympic Steel vs. POSCO Holdings | Olympic Steel vs. Steel Dynamics |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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