Correlation Between ALGOMA STEEL and CHEMICAL INDUSTRIES

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

Diversification Opportunities for ALGOMA STEEL and CHEMICAL INDUSTRIES

0.0

Correlation Coefficient

ALGOMA STEEL  CHEMICAL INDUSTRIES

Pay attention - limited upside

The 3 months correlation between ALGOMA and CHEMICAL is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ALGOMA STEEL GROUP and CHEMICAL INDUSTRIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHEMICAL INDUSTRIES has no effect on the direction of ALGOMA STEEL i.e., ALGOMA STEEL and CHEMICAL INDUSTRIES go up and down completely randomly.

Pair Corralation between ALGOMA STEEL and CHEMICAL INDUSTRIES

Assuming the 90 days horizon ALGOMA STEEL GROUP is expected to generate 9.88 times more return on investment than CHEMICAL INDUSTRIES. However, ALGOMA STEEL is 9.88 times more volatile than CHEMICAL INDUSTRIES. It trades about 0.02 of its potential returns per unit of risk. CHEMICAL INDUSTRIES is currently generating about 0.06 per unit of risk. If you would invest  725.00  in ALGOMA STEEL GROUP on October 25, 2024 and sell it today you would earn a total of  85.00  from holding ALGOMA STEEL GROUP or generate 11.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ALGOMA STEEL GROUP  vs.  CHEMICAL INDUSTRIES

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 latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CHEMICAL INDUSTRIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHEMICAL INDUSTRIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, CHEMICAL INDUSTRIES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ALGOMA STEEL and CHEMICAL INDUSTRIES

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

The idea behind ALGOMA STEEL GROUP and CHEMICAL INDUSTRIES 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.