Correlation Between Algoma Steel and WEBTOON Entertainment

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

Diversification Opportunities for Algoma Steel and WEBTOON Entertainment

-0.17

Correlation Coefficient

Algoma Steel  WEBTOON Entertainment

Good diversification

The 3 months correlation between Algoma and WEBTOON is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and WEBTOON Entertainment Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEBTOON Entertainment 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 WEBTOON Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEBTOON Entertainment has no effect on the direction of Algoma Steel i.e., Algoma Steel and WEBTOON Entertainment go up and down completely randomly.

Pair Corralation between Algoma Steel and WEBTOON Entertainment

Given the investment horizon of 90 days Algoma Steel Group is expected to generate 0.48 times more return on investment than WEBTOON Entertainment. However, Algoma Steel Group is 2.1 times less risky than WEBTOON Entertainment. It trades about 0.12 of its potential returns per unit of risk. WEBTOON Entertainment Common is currently generating about -0.05 per unit of risk. If you would invest  680.00  in Algoma Steel Group on September 25, 2024 and sell it today you would earn a total of  281.00  from holding Algoma Steel Group or generate 41.32% return on investment over 90 days.

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

Algoma Steel Group  vs.  WEBTOON Entertainment Common

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.

WEBTOON Entertainment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WEBTOON Entertainment Common are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, WEBTOON Entertainment displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Algoma Steel and WEBTOON Entertainment

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

The idea behind Algoma Steel Group and WEBTOON Entertainment Common 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 Anywhere module to track or share privately all of your investments from the convenience of any device.