Correlation Between Algoma Steel and BlueScope Steel

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

Diversification Opportunities for Algoma Steel and BlueScope Steel

0.31

Correlation Coefficient

Algoma Steel  BlueScope Steel

Weak diversification

The 3 months correlation between Algoma and BlueScope is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and BlueScope Steel Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel 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 BlueScope Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueScope Steel has no effect on the direction of Algoma Steel i.e., Algoma Steel and BlueScope Steel go up and down completely randomly.

Pair Corralation between Algoma Steel and BlueScope Steel

Assuming the 90 days horizon Algoma Steel Group is expected to under-perform the BlueScope Steel. In addition to that, Algoma Steel is 1.02 times more volatile than BlueScope Steel Ltd. It trades about -0.39 of its total potential returns per unit of risk. BlueScope Steel Ltd is currently generating about -0.15 per unit of volatility. If you would invest  6,854  in BlueScope Steel Ltd on September 28, 2024 and sell it today you would lose (686.00) from holding BlueScope Steel Ltd or give up 10.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Algoma Steel Group  vs.  BlueScope Steel Ltd

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. In spite of latest uncertain performance, the Stock's essential indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

BlueScope Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlueScope Steel Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, BlueScope Steel is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Algoma Steel and BlueScope Steel

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

The idea behind Algoma Steel Group and BlueScope Steel Ltd 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.