Correlation Between Algoma Steel and 493267AK4

Can any of the company-specific risk be diversified away by investing in both Algoma Steel and 493267AK4 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 493267AK4 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 KEY 5, you can compare the effects of market volatilities on Algoma Steel and 493267AK4 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 493267AK4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and 493267AK4.

Diversification Opportunities for Algoma Steel and 493267AK4

0.25

Correlation Coefficient

Algoma Steel  493267AK4

Modest diversification

The 3 months correlation between Algoma and 493267AK4 is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and KEY 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 493267AK4 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 493267AK4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 493267AK4 has no effect on the direction of Algoma Steel i.e., Algoma Steel and 493267AK4 go up and down completely randomly.

Pair Corralation between Algoma Steel and 493267AK4

Given the investment horizon of 90 days Algoma Steel Group is expected to generate 1.34 times more return on investment than 493267AK4. However, Algoma Steel is 1.34 times more volatile than KEY 5. It trades about -0.01 of its potential returns per unit of risk. KEY 5 is currently generating about -0.07 per unit of risk. If you would invest  979.00  in Algoma Steel Group on September 21, 2024 and sell it today you would lose (29.00) from holding Algoma Steel Group or give up 2.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Algoma Steel Group  vs.  KEY 5

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 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.

493267AK4

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEY 5 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for KEY 5 investors.

Pair Trading with Algoma Steel and 493267AK4

The main advantage of trading using opposite Algoma Steel and 493267AK4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, 493267AK4 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 493267AK4 will offset losses from the drop in 493267AK4's long position.

The idea behind Algoma Steel Group and KEY 5 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.