Correlation Between Algoma Steel and Solid Impact

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

Diversification Opportunities for Algoma Steel and Solid Impact

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Correlation Coefficient

Algoma Steel  Solid Impact

Pay attention - limited upside

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

Pair Corralation between Algoma Steel and Solid Impact

Assuming the 90 days trading horizon Algoma Steel Group is expected to generate 0.84 times more return on investment than Solid Impact. However, Algoma Steel Group is 1.19 times less risky than Solid Impact. It trades about 0.02 of its potential returns per unit of risk. Solid Impact Investments is currently generating about -0.04 per unit of risk. If you would invest  1,064  in Algoma Steel Group on October 23, 2024 and sell it today you would earn a total of  171.00  from holding Algoma Steel Group or generate 16.07% 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.  Solid Impact Investments

Algoma Steel Group

Risk-Adjusted Performance

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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 very healthy basic indicators, Algoma Steel is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Solid Impact Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solid Impact Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Solid Impact 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 Solid Impact

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

The idea behind Algoma Steel Group and Solid Impact Investments 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.