Correlation Between ALGOMA STEEL and AURUBIS AG

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

Diversification Opportunities for ALGOMA STEEL and AURUBIS AG

0.56

Correlation Coefficient

ALGOMA STEEL  AURUBIS AG

Very weak diversification

The 3 months correlation between ALGOMA and AURUBIS is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding ALGOMA STEEL GROUP and AURUBIS AG UNSPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AURUBIS AG UNSPADR 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 AURUBIS AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AURUBIS AG UNSPADR has no effect on the direction of ALGOMA STEEL i.e., ALGOMA STEEL and AURUBIS AG go up and down completely randomly.

Pair Corralation between ALGOMA STEEL and AURUBIS AG

Assuming the 90 days horizon ALGOMA STEEL GROUP is expected to generate 1.62 times more return on investment than AURUBIS AG. However, ALGOMA STEEL is 1.62 times more volatile than AURUBIS AG UNSPADR. It trades about -0.06 of its potential returns per unit of risk. AURUBIS AG UNSPADR is currently generating about -0.39 per unit of risk. If you would invest  955.00  in ALGOMA STEEL GROUP on October 9, 2024 and sell it today you would lose (25.00) from holding ALGOMA STEEL GROUP or give up 2.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.12%
Values	Daily Returns

ALGOMA STEEL GROUP  vs.  AURUBIS AG UNSPADR

ALGOMA STEEL GROUP

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ALGOMA STEEL GROUP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ALGOMA STEEL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

AURUBIS AG UNSPADR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AURUBIS AG UNSPADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AURUBIS AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ALGOMA STEEL and AURUBIS AG

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

The idea behind ALGOMA STEEL GROUP and AURUBIS AG UNSPADR 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.