Correlation Between Olympic Steel and Fidelity

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

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

Diversification Opportunities for Olympic Steel and Fidelity

0.22

Correlation Coefficient

Olympic Steel  Fidelity

Modest diversification

The 3 months correlation between Olympic and Fidelity is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and Fidelity Guaranty Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Guaranty Life 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 Fidelity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Guaranty Life has no effect on the direction of Olympic Steel i.e., Olympic Steel and Fidelity go up and down completely randomly.

Pair Corralation between Olympic Steel and Fidelity

Given the investment horizon of 90 days Olympic Steel is expected to under-perform the Fidelity. In addition to that, Olympic Steel is 4.21 times more volatile than Fidelity Guaranty Life. It trades about -0.01 of its total potential returns per unit of risk. Fidelity Guaranty Life is currently generating about 0.03 per unit of volatility. If you would invest  9,738  in Fidelity Guaranty Life on September 12, 2024 and sell it today you would earn a total of  217.00  from holding Fidelity Guaranty Life or generate 2.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	36.56%
Values	Daily Returns

Olympic Steel  vs.  Fidelity Guaranty Life

Olympic Steel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Olympic Steel are ranked lower than 6 (%) 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.

Fidelity Guaranty Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Guaranty Life has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fidelity is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Olympic Steel and Fidelity

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

The idea behind Olympic Steel and Fidelity Guaranty Life 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.