Correlation Between Olympic Steel and ArcelorMittal

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Can any of the company-specific risk be diversified away by investing in both Olympic Steel and ArcelorMittal 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 ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Olympic Steel and ArcelorMittal SA ADR, you can compare the effects of market volatilities on Olympic Steel and ArcelorMittal 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 ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olympic Steel and ArcelorMittal.

Diversification Opportunities for Olympic Steel and ArcelorMittal

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between Olympic and ArcelorMittal is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel and ArcelorMittal SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA ADR 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA ADR has no effect on the direction of Olympic Steel i.e., Olympic Steel and ArcelorMittal go up and down completely randomly.

Pair Corralation between Olympic Steel and ArcelorMittal

Given the investment horizon of 90 days Olympic Steel is expected to generate 1.31 times more return on investment than ArcelorMittal. However, Olympic Steel is 1.31 times more volatile than ArcelorMittal SA ADR. It trades about 0.06 of its potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about 0.0 per unit of risk. If you would invest  3,728  in Olympic Steel on December 29, 2023 and sell it today you would earn a total of  3,348  from holding Olympic Steel or generate 89.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.78%
ValuesDaily Returns

Olympic Steel  vs.  ArcelorMittal SA ADR

 Performance 
       Timeline  
Olympic Steel 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Olympic Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Olympic Steel may actually be approaching a critical reversion point that can send shares even higher in April 2024.
ArcelorMittal SA ADR 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days ArcelorMittal SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ArcelorMittal is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Olympic Steel and ArcelorMittal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Olympic Steel and ArcelorMittal

The main advantage of trading using opposite Olympic Steel and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olympic Steel position performs unexpectedly, ArcelorMittal 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 ArcelorMittal will offset losses from the drop in ArcelorMittal's long position.
The idea behind Olympic Steel and ArcelorMittal SA ADR 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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