Correlation Between Algoma Steel and Sun Life

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

Diversification Opportunities for Algoma Steel and Sun Life

0.02

Correlation Coefficient

Algoma Steel  Sun Life

Significant diversification

The 3 months correlation between Algoma and Sun is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Sun Life Non in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Life Non 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 Sun Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Life Non has no effect on the direction of Algoma Steel i.e., Algoma Steel and Sun Life go up and down completely randomly.

Pair Corralation between Algoma Steel and Sun Life

Assuming the 90 days trading horizon Algoma Steel Group is expected to under-perform the Sun Life. In addition to that, Algoma Steel is 3.64 times more volatile than Sun Life Non. It trades about -0.2 of its total potential returns per unit of risk. Sun Life Non is currently generating about 0.06 per unit of volatility. If you would invest  1,650  in Sun Life Non on December 22, 2024 and sell it today you would earn a total of  50.00  from holding Sun Life Non or generate 3.03% return on investment over 90 days.

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

Algoma Steel Group  vs.  Sun Life Non

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.

Sun Life Non

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Non are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Sun Life is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Algoma Steel and Sun Life

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

The idea behind Algoma Steel Group and Sun Life Non 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.