Correlation Between Olympic Steel and Vistra Energy

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

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

Diversification Opportunities for Olympic Steel and Vistra Energy

-0.12

Correlation Coefficient

Olympic Steel  Vistra Energy

Good diversification

The 3 months correlation between Olympic and Vistra is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and Vistra Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vistra Energy Corp 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 Vistra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vistra Energy Corp has no effect on the direction of Olympic Steel i.e., Olympic Steel and Vistra Energy go up and down completely randomly.

Pair Corralation between Olympic Steel and Vistra Energy

Given the investment horizon of 90 days Olympic Steel is expected to under-perform the Vistra Energy. But the stock apears to be less risky and, when comparing its historical volatility, Olympic Steel is 1.26 times less risky than Vistra Energy. The stock trades about -0.03 of its potential returns per unit of risk. The Vistra Energy Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  12,538  in Vistra Energy Corp on October 24, 2024 and sell it today you would earn a total of  6,148  from holding Vistra Energy Corp or generate 49.03% return on investment over 90 days.

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

Olympic Steel  vs.  Vistra Energy Corp

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 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.

Vistra Energy Corp

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Olympic Steel and Vistra Energy

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

The idea behind Olympic Steel and Vistra Energy Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.