Correlation Between ALGOMA STEEL and Hitachi

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

Diversification Opportunities for ALGOMA STEEL and Hitachi

0.07

Correlation Coefficient

ALGOMA STEEL  Hitachi

Significant diversification

The 3 months correlation between ALGOMA and Hitachi is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding ALGOMA STEEL GROUP and Hitachi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi 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 Hitachi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi has no effect on the direction of ALGOMA STEEL i.e., ALGOMA STEEL and Hitachi go up and down completely randomly.

Pair Corralation between ALGOMA STEEL and Hitachi

Assuming the 90 days horizon ALGOMA STEEL GROUP is expected to under-perform the Hitachi. In addition to that, ALGOMA STEEL is 1.23 times more volatile than Hitachi. It trades about -0.02 of its total potential returns per unit of risk. Hitachi is currently generating about -0.02 per unit of volatility. If you would invest  2,396  in Hitachi on October 24, 2024 and sell it today you would lose (97.00) from holding Hitachi or give up 4.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

ALGOMA STEEL GROUP  vs.  Hitachi

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Hitachi

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ALGOMA STEEL and Hitachi

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

The idea behind ALGOMA STEEL GROUP and Hitachi 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.