Correlation Between Algoma Steel and 49326EEN9

Can any of the company-specific risk be diversified away by investing in both Algoma Steel and 49326EEN9 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 49326EEN9 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 4789 01 JUN 33, you can compare the effects of market volatilities on Algoma Steel and 49326EEN9 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 49326EEN9. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and 49326EEN9.

Diversification Opportunities for Algoma Steel and 49326EEN9

0.61

Correlation Coefficient

Algoma Steel  49326EEN9

Poor diversification

The 3 months correlation between Algoma and 49326EEN9 is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and KEY 4789 01 JUN 33 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEY 4789 01 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 49326EEN9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEY 4789 01 has no effect on the direction of Algoma Steel i.e., Algoma Steel and 49326EEN9 go up and down completely randomly.

Pair Corralation between Algoma Steel and 49326EEN9

Given the investment horizon of 90 days Algoma Steel Group is expected to generate 1.26 times more return on investment than 49326EEN9. However, Algoma Steel is 1.26 times more volatile than KEY 4789 01 JUN 33. It trades about -0.08 of its potential returns per unit of risk. KEY 4789 01 JUN 33 is currently generating about -0.13 per unit of risk. If you would invest  958.00  in Algoma Steel Group on October 22, 2024 and sell it today you would lose (126.00) from holding Algoma Steel Group or give up 13.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Algoma Steel Group  vs.  KEY 4789 01 JUN 33

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.

KEY 4789 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEY 4789 01 JUN 33 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for KEY 4789 01 JUN 33 investors.

Pair Trading with Algoma Steel and 49326EEN9

The main advantage of trading using opposite Algoma Steel and 49326EEN9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, 49326EEN9 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 49326EEN9 will offset losses from the drop in 49326EEN9's long position.

The idea behind Algoma Steel Group and KEY 4789 01 JUN 33 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.