Correlation Between PUBLIC and Olympic Steel

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

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

Diversification Opportunities for PUBLIC and Olympic Steel

-0.4

Correlation Coefficient

PUBLIC  Olympic Steel

Very good diversification

The 3 months correlation between PUBLIC and Olympic is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding PUBLIC SVC O and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel and PUBLIC 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 PUBLIC SVC O 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 PUBLIC i.e., PUBLIC and Olympic Steel go up and down completely randomly.

Pair Corralation between PUBLIC and Olympic Steel

Assuming the 90 days trading horizon PUBLIC SVC O is expected to under-perform the Olympic Steel. But the bond apears to be less risky and, when comparing its historical volatility, PUBLIC SVC O is 1.46 times less risky than Olympic Steel. The bond trades about -0.08 of its potential returns per unit of risk. The Olympic Steel is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,694  in Olympic Steel on September 3, 2024 and sell it today you would earn a total of  534.00  from holding Olympic Steel or generate 14.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	76.56%
Values	Daily Returns

PUBLIC SVC O  vs.  Olympic Steel

PUBLIC SVC O

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PUBLIC SVC O has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for PUBLIC SVC O investors.

Olympic Steel

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Olympic Steel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Olympic Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PUBLIC and Olympic Steel

The main advantage of trading using opposite PUBLIC and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PUBLIC 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 PUBLIC SVC O 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.