Correlation Between Algoma Steel and Insteel Industries

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

Diversification Opportunities for Algoma Steel and Insteel Industries

AlgomaInsteelDiversified AwayAlgomaInsteelDiversified Away100%
-0.02
  Correlation Coefficient

Good diversification

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

Pair Corralation between Algoma Steel and Insteel Industries

Given the investment horizon of 90 days Algoma Steel Group is expected to generate 1.09 times more return on investment than Insteel Industries. However, Algoma Steel is 1.09 times more volatile than Insteel Industries. It trades about -0.01 of its potential returns per unit of risk. Insteel Industries is currently generating about -0.04 per unit of risk. If you would invest  971.00  in Algoma Steel Group on September 20, 2024 and sell it today you would lose (36.00) from holding Algoma Steel Group or give up 3.71% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Algoma Steel Group  vs.  Insteel Industries

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -15-10-5051015
JavaScript chart by amCharts 3.21.15ASTL IIIN
       Timeline  
Algoma Steel Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 quite persistent basic indicators, Algoma Steel is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec9.51010.51111.512
Insteel Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Insteel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Insteel Industries is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec2728293031

Algoma Steel and Insteel Industries Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.65-2.73-1.82-0.9-0.01530.871.762.653.54 0.0550.0600.0650.0700.0750.080
JavaScript chart by amCharts 3.21.15ASTL IIIN
       Returns  

Pair Trading with Algoma Steel and Insteel Industries

The main advantage of trading using opposite Algoma Steel and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, Insteel Industries 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 Insteel Industries will offset losses from the drop in Insteel Industries' long position.
The idea behind Algoma Steel Group and Insteel Industries 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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