Correlation Between Algoma Steel and Cascades

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

Diversification Opportunities for Algoma Steel and Cascades

0.78

Correlation Coefficient

Algoma Steel  Cascades

Poor diversification

The 3 months correlation between Algoma and Cascades is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Cascades in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cascades 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 Cascades. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cascades has no effect on the direction of Algoma Steel i.e., Algoma Steel and Cascades go up and down completely randomly.

Pair Corralation between Algoma Steel and Cascades

Given the investment horizon of 90 days Algoma Steel Group is expected to under-perform the Cascades. In addition to that, Algoma Steel is 1.93 times more volatile than Cascades. It trades about -0.23 of its total potential returns per unit of risk. Cascades is currently generating about -0.16 per unit of volatility. If you would invest  1,173  in Cascades on December 30, 2024 and sell it today you would lose (201.00) from holding Cascades or give up 17.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

Algoma Steel Group  vs.  Cascades

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. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Cascades

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cascades has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating 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.

Pair Trading with Algoma Steel and Cascades

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

The idea behind Algoma Steel Group and Cascades 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.