Correlation Between General Dynamics and Olympic Steel

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

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

Diversification Opportunities for General Dynamics and Olympic Steel

0.47

Correlation Coefficient

General Dynamics  Olympic Steel

Very weak diversification

The 3 months correlation between General and Olympic is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel and General Dynamics 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 General Dynamics 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 General Dynamics i.e., General Dynamics and Olympic Steel go up and down completely randomly.

Pair Corralation between General Dynamics and Olympic Steel

Assuming the 90 days horizon General Dynamics is expected to generate 0.53 times more return on investment than Olympic Steel. However, General Dynamics is 1.88 times less risky than Olympic Steel. It trades about 0.05 of its potential returns per unit of risk. Olympic Steel is currently generating about -0.03 per unit of risk. If you would invest  19,418  in General Dynamics on April 20, 2025 and sell it today you would earn a total of  6,602  from holding General Dynamics or generate 34.0% return on investment over 90 days.

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

General Dynamics  vs.  Olympic Steel

General Dynamics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Dynamics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, General Dynamics may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Olympic Steel

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Olympic Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Olympic Steel may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with General Dynamics and Olympic Steel

The main advantage of trading using opposite General Dynamics and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Dynamics 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 General Dynamics 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.