Correlation Between Olympic Steel and Balance Labs

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

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

Diversification Opportunities for Olympic Steel and Balance Labs

-0.88

Correlation Coefficient

Olympic Steel  Balance Labs

Pay attention - limited upside

The 3 months correlation between Olympic and Balance is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and Balance Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balance Labs 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 Balance Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balance Labs has no effect on the direction of Olympic Steel i.e., Olympic Steel and Balance Labs go up and down completely randomly.

Pair Corralation between Olympic Steel and Balance Labs

Given the investment horizon of 90 days Olympic Steel is expected to under-perform the Balance Labs. But the stock apears to be less risky and, when comparing its historical volatility, Olympic Steel is 1.51 times less risky than Balance Labs. The stock trades about -0.02 of its potential returns per unit of risk. The Balance Labs is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Balance Labs on December 4, 2024 and sell it today you would lose (3.00) from holding Balance Labs or give up 12.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.0%
Values	Daily Returns

Olympic Steel  vs.  Balance Labs

Olympic Steel

Risk-Adjusted Performance

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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Balance Labs

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Balance Labs are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Balance Labs exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Olympic Steel and Balance Labs

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

The idea behind Olympic Steel and Balance Labs 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.