Correlation Between ALGOMA STEEL and CITIC Securities

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

By analyzing existing cross correlation between ALGOMA STEEL GROUP and CITIC Securities, you can compare the effects of market volatilities on ALGOMA STEEL and CITIC Securities 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 ALGOMA STEEL with a short position of CITIC Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALGOMA STEEL and CITIC Securities.

Diversification Opportunities for ALGOMA STEEL and CITIC Securities

0.4

Correlation Coefficient

ALGOMA STEEL  CITIC Securities

Very weak diversification

The 3 months correlation between ALGOMA and CITIC is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding ALGOMA STEEL GROUP and CITIC Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Securities and ALGOMA 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 ALGOMA STEEL GROUP are associated (or correlated) with CITIC Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Securities has no effect on the direction of ALGOMA STEEL i.e., ALGOMA STEEL and CITIC Securities go up and down completely randomly.

Pair Corralation between ALGOMA STEEL and CITIC Securities

Assuming the 90 days horizon ALGOMA STEEL is expected to generate 4.21 times less return on investment than CITIC Securities. But when comparing it to its historical volatility, ALGOMA STEEL GROUP is 2.15 times less risky than CITIC Securities. It trades about 0.03 of its potential returns per unit of risk. CITIC Securities is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  75.00  in CITIC Securities on October 12, 2024 and sell it today you would earn a total of  171.00  from holding CITIC Securities or generate 228.0% return on investment over 90 days.

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

ALGOMA STEEL GROUP  vs.  CITIC Securities

ALGOMA STEEL GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALGOMA STEEL GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ALGOMA STEEL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

CITIC Securities

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Securities are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, CITIC Securities reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ALGOMA STEEL and CITIC Securities

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

The idea behind ALGOMA STEEL GROUP and CITIC Securities 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.