Correlation Between Life Time and Olympic Steel

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

By analyzing existing cross correlation between Life Time Group and Olympic Steel, you can compare the effects of market volatilities on Life Time and Olympic 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 Life Time with a short position of Olympic Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Time and Olympic Steel.

Diversification Opportunities for Life Time and Olympic Steel

0.16

Correlation Coefficient

Life Time  Olympic Steel

Average diversification

The 3 months correlation between Life and Olympic is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Life Time Group and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel and Life Time 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 Life Time Group are associated (or correlated) with Olympic Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olympic Steel has no effect on the direction of Life Time i.e., Life Time and Olympic Steel go up and down completely randomly.

Pair Corralation between Life Time and Olympic Steel

Considering the 90-day investment horizon Life Time Group is expected to under-perform the Olympic Steel. But the stock apears to be less risky and, when comparing its historical volatility, Life Time Group is 1.41 times less risky than Olympic Steel. The stock trades about -0.05 of its potential returns per unit of risk. The Olympic Steel is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,833  in Olympic Steel on September 15, 2024 and sell it today you would earn a total of  134.00  from holding Olympic Steel or generate 3.5% return on investment over 90 days.

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

Life Time Group  vs.  Olympic Steel

Life Time Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life Time Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Life Time is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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.

Pair Trading with Life Time and Olympic Steel

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

The idea behind Life Time Group and Olympic Steel 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.