Correlation Between Algoma Steel and Wheaton Precious

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

Diversification Opportunities for Algoma Steel and Wheaton Precious

0.09

Correlation Coefficient

Algoma Steel  Wheaton Precious

Significant diversification

The 3 months correlation between Algoma and Wheaton is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Wheaton Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheaton Precious 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 Wheaton Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheaton Precious Metals has no effect on the direction of Algoma Steel i.e., Algoma Steel and Wheaton Precious go up and down completely randomly.

Pair Corralation between Algoma Steel and Wheaton Precious

Assuming the 90 days trading horizon Algoma Steel Group is expected to under-perform the Wheaton Precious. In addition to that, Algoma Steel is 1.23 times more volatile than Wheaton Precious Metals. It trades about -0.24 of its total potential returns per unit of risk. Wheaton Precious Metals is currently generating about -0.15 per unit of volatility. If you would invest  8,856  in Wheaton Precious Metals on October 5, 2024 and sell it today you would lose (490.00) from holding Wheaton Precious Metals or give up 5.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Algoma Steel Group  vs.  Wheaton Precious Metals

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. 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.

Wheaton Precious Metals

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Wheaton Precious is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Algoma Steel and Wheaton Precious

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

The idea behind Algoma Steel Group and Wheaton Precious 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.