Correlation Between ALGOMA STEEL and State Street

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

Diversification Opportunities for ALGOMA STEEL and State Street

0.53

Correlation Coefficient

ALGOMA STEEL  State Street

Very weak diversification

The 3 months correlation between ALGOMA and State is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding ALGOMA STEEL GROUP and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street has no effect on the direction of ALGOMA STEEL i.e., ALGOMA STEEL and State Street go up and down completely randomly.

Pair Corralation between ALGOMA STEEL and State Street

Assuming the 90 days horizon ALGOMA STEEL GROUP is expected to generate 1.83 times more return on investment than State Street. However, ALGOMA STEEL is 1.83 times more volatile than State Street. It trades about 0.13 of its potential returns per unit of risk. State Street is currently generating about 0.2 per unit of risk. If you would invest  623.00  in ALGOMA STEEL GROUP on October 4, 2024 and sell it today you would earn a total of  307.00  from holding ALGOMA STEEL GROUP or generate 49.28% 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.  State Street

ALGOMA STEEL GROUP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ALGOMA STEEL GROUP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

State Street

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in State Street are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, State Street reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ALGOMA STEEL and State Street

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

The idea behind ALGOMA STEEL GROUP and State Street 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.