Correlation Between Algoma Steel and Founders Metals

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

Diversification Opportunities for Algoma Steel and Founders Metals

0.0

Correlation Coefficient

Algoma Steel  Founders Metals

Pay attention - limited upside

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

Pair Corralation between Algoma Steel and Founders Metals

If you would invest (100.00) in Founders Metals on December 21, 2024 and sell it today you would earn a total of  100.00  from holding Founders Metals or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Algoma Steel Group  vs.  Founders Metals

Algoma Steel Group

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Founders Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Founders Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Founders Metals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Algoma Steel and Founders Metals

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

The idea behind Algoma Steel Group and Founders Metals 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.