Correlation Between Olympic Steel and Consol Energy

Can any of the company-specific risk be diversified away by investing in both Olympic Steel and Consol 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 Consol 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 Consol Energy, you can compare the effects of market volatilities on Olympic Steel and Consol 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 Consol Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olympic Steel and Consol Energy.

Diversification Opportunities for Olympic Steel and Consol Energy

0.69

Correlation Coefficient

Olympic Steel  Consol Energy

Poor diversification

The 3 months correlation between Olympic and Consol is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and Consol Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consol Energy 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 Consol Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consol Energy has no effect on the direction of Olympic Steel i.e., Olympic Steel and Consol Energy go up and down completely randomly.

Pair Corralation between Olympic Steel and Consol Energy

Given the investment horizon of 90 days Olympic Steel is expected to generate 3.5 times less return on investment than Consol Energy. In addition to that, Olympic Steel is 1.13 times more volatile than Consol Energy. It trades about 0.03 of its total potential returns per unit of risk. Consol Energy is currently generating about 0.13 per unit of volatility. If you would invest  9,684  in Consol Energy on September 15, 2024 and sell it today you would earn a total of  1,964  from holding Consol Energy or generate 20.28% return on investment over 90 days.

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

Olympic Steel  vs.  Consol Energy

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.

Consol Energy

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Consol Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Consol Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Olympic Steel and Consol Energy

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

The idea behind Olympic Steel and Consol Energy 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.