Correlation Between Algoma Steel and Mamas Creations

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

Diversification Opportunities for Algoma Steel and Mamas Creations

0.36

Correlation Coefficient

Algoma Steel  Mamas Creations

Weak diversification

The 3 months correlation between Algoma and Mamas is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Mamas Creations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mamas Creations 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 Mamas Creations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mamas Creations has no effect on the direction of Algoma Steel i.e., Algoma Steel and Mamas Creations go up and down completely randomly.

Pair Corralation between Algoma Steel and Mamas Creations

Given the investment horizon of 90 days Algoma Steel Group is expected to under-perform the Mamas Creations. But the stock apears to be less risky and, when comparing its historical volatility, Algoma Steel Group is 1.89 times less risky than Mamas Creations. The stock trades about -0.32 of its potential returns per unit of risk. The Mamas Creations is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  787.00  in Mamas Creations on October 9, 2024 and sell it today you would lose (57.00) from holding Mamas Creations or give up 7.24% of portfolio value over 90 days.

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

Algoma Steel Group  vs.  Mamas Creations

Algoma Steel Group

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Mamas Creations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mamas Creations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Algoma Steel and Mamas Creations

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

The idea behind Algoma Steel Group and Mamas Creations 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.