Correlation Between Olympic Steel and Labrador Iron

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

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

Diversification Opportunities for Olympic Steel and Labrador Iron

0.14

Correlation Coefficient

Olympic Steel  Labrador Iron

Average diversification

The 3 months correlation between Olympic and Labrador is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and Labrador Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labrador Iron Ore 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 Labrador Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labrador Iron Ore has no effect on the direction of Olympic Steel i.e., Olympic Steel and Labrador Iron go up and down completely randomly.

Pair Corralation between Olympic Steel and Labrador Iron

Given the investment horizon of 90 days Olympic Steel is expected to generate 1.64 times more return on investment than Labrador Iron. However, Olympic Steel is 1.64 times more volatile than Labrador Iron Ore. It trades about 0.0 of its potential returns per unit of risk. Labrador Iron Ore is currently generating about -0.01 per unit of risk. If you would invest  3,838  in Olympic Steel on October 9, 2024 and sell it today you would lose (611.00) from holding Olympic Steel or give up 15.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Olympic Steel  vs.  Labrador Iron Ore

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.

Labrador Iron Ore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Labrador Iron Ore has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Olympic Steel and Labrador Iron

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

The idea behind Olympic Steel and Labrador Iron Ore 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.