Correlation Between Algoma Steel and Amazon CDR

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

Diversification Opportunities for Algoma Steel and Amazon CDR

0.69

Correlation Coefficient

Algoma Steel  Amazon CDR

Poor diversification

The 3 months correlation between Algoma and Amazon is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Amazon CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon CDR 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 Amazon CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon CDR has no effect on the direction of Algoma Steel i.e., Algoma Steel and Amazon CDR go up and down completely randomly.

Pair Corralation between Algoma Steel and Amazon CDR

Given the investment horizon of 90 days Algoma Steel is expected to generate 2.07 times less return on investment than Amazon CDR. In addition to that, Algoma Steel is 1.25 times more volatile than Amazon CDR. It trades about 0.06 of its total potential returns per unit of risk. Amazon CDR is currently generating about 0.15 per unit of volatility. If you would invest  2,105  in Amazon CDR on September 3, 2024 and sell it today you would earn a total of  372.00  from holding Amazon CDR or generate 17.67% return on investment over 90 days.

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

Algoma Steel Group  vs.  Amazon CDR

Algoma Steel Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Algoma Steel Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Algoma Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Amazon CDR

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon CDR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Amazon CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Algoma Steel and Amazon CDR

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

The idea behind Algoma Steel Group and Amazon CDR 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.