Correlation Between Algoma Steel and Magnum Goldcorp
Can any of the company-specific risk be diversified away by investing in both Algoma Steel and Magnum Goldcorp 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 Magnum Goldcorp 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 Magnum Goldcorp, you can compare the effects of market volatilities on Algoma Steel and Magnum Goldcorp 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 Magnum Goldcorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and Magnum Goldcorp.
Diversification Opportunities for Algoma Steel and Magnum Goldcorp
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Algoma and Magnum is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Magnum Goldcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnum Goldcorp 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 Magnum Goldcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnum Goldcorp has no effect on the direction of Algoma Steel i.e., Algoma Steel and Magnum Goldcorp go up and down completely randomly.
Pair Corralation between Algoma Steel and Magnum Goldcorp
Given the investment horizon of 90 days Algoma Steel Group is expected to under-perform the Magnum Goldcorp. But the stock apears to be less risky and, when comparing its historical volatility, Algoma Steel Group is 5.27 times less risky than Magnum Goldcorp. The stock trades about -0.25 of its potential returns per unit of risk. The Magnum Goldcorp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2.50 in Magnum Goldcorp on December 2, 2024 and sell it today you would earn a total of 1.00 from holding Magnum Goldcorp or generate 40.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 98.39% |
Values | Daily Returns |
Algoma Steel Group vs. Magnum Goldcorp
Performance |
Timeline |
Algoma Steel Group |
Magnum Goldcorp |
Algoma Steel and Magnum Goldcorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Algoma Steel and Magnum Goldcorp
The main advantage of trading using opposite Algoma Steel and Magnum Goldcorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, Magnum Goldcorp 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 Magnum Goldcorp will offset losses from the drop in Magnum Goldcorp's long position.Algoma Steel vs. Friedman Industries | Algoma Steel vs. ArcelorMittal SA | Algoma Steel vs. Aperam PK | Algoma Steel vs. Acerinox SA ADR |
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Check out your portfolio center.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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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