Correlation Between Algoma Steel and Olin

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

Diversification Opportunities for Algoma Steel and Olin

-0.44

Correlation Coefficient

Algoma Steel  Olin

Very good diversification

The 3 months correlation between Algoma and Olin is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Olin Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olin 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 Olin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olin has no effect on the direction of Algoma Steel i.e., Algoma Steel and Olin go up and down completely randomly.

Pair Corralation between Algoma Steel and Olin

Given the investment horizon of 90 days Algoma Steel Group is expected to generate 1.03 times more return on investment than Olin. However, Algoma Steel is 1.03 times more volatile than Olin Corporation. It trades about 0.04 of its potential returns per unit of risk. Olin Corporation is currently generating about 0.02 per unit of risk. If you would invest  1,006  in Algoma Steel Group on September 3, 2024 and sell it today you would earn a total of  50.00  from holding Algoma Steel Group or generate 4.97% return on investment over 90 days.

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

Algoma Steel Group  vs.  Olin Corp.

Algoma Steel Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Algoma Steel Group are ranked lower than 3 (%) 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.

Olin

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Olin Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Olin is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Algoma Steel and Olin

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

The idea behind Algoma Steel Group and Olin Corporation 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.