Correlation Between Algoma Steel and Ascot Resources

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

Diversification Opportunities for Algoma Steel and Ascot Resources

0.31

Correlation Coefficient

Algoma Steel  Ascot Resources

Weak diversification

The 3 months correlation between Algoma and Ascot is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Ascot Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascot Resources 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 Ascot Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascot Resources has no effect on the direction of Algoma Steel i.e., Algoma Steel and Ascot Resources go up and down completely randomly.

Pair Corralation between Algoma Steel and Ascot Resources

Assuming the 90 days trading horizon Algoma Steel Group is expected to under-perform the Ascot Resources. But the stock apears to be less risky and, when comparing its historical volatility, Algoma Steel Group is 2.09 times less risky than Ascot Resources. The stock trades about -0.3 of its potential returns per unit of risk. The Ascot Resources is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Ascot Resources on October 25, 2024 and sell it today you would earn a total of  2.00  from holding Ascot Resources or generate 10.53% return on investment over 90 days.

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

Algoma Steel Group  vs.  Ascot Resources

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. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Ascot Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ascot Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Algoma Steel and Ascot Resources

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

The idea behind Algoma Steel Group and Ascot Resources 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.