Correlation Between Dairy Farm and ALGOMA STEEL

Can any of the company-specific risk be diversified away by investing in both Dairy Farm and ALGOMA 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 Dairy Farm and ALGOMA STEEL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dairy Farm International and ALGOMA STEEL GROUP, you can compare the effects of market volatilities on Dairy Farm and ALGOMA 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 Dairy Farm with a short position of ALGOMA STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and ALGOMA STEEL.

Diversification Opportunities for Dairy Farm and ALGOMA STEEL

0.55

Correlation Coefficient

Dairy Farm  ALGOMA STEEL

Very weak diversification

The 3 months correlation between Dairy and ALGOMA is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and ALGOMA STEEL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALGOMA STEEL GROUP and Dairy Farm 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 Dairy Farm International are associated (or correlated) with ALGOMA STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALGOMA STEEL GROUP has no effect on the direction of Dairy Farm i.e., Dairy Farm and ALGOMA STEEL go up and down completely randomly.

Pair Corralation between Dairy Farm and ALGOMA STEEL

Assuming the 90 days trading horizon Dairy Farm International is expected to under-perform the ALGOMA STEEL. In addition to that, Dairy Farm is 1.04 times more volatile than ALGOMA STEEL GROUP. It trades about -0.01 of its total potential returns per unit of risk. ALGOMA STEEL GROUP is currently generating about 0.02 per unit of volatility. If you would invest  744.00  in ALGOMA STEEL GROUP on October 26, 2024 and sell it today you would earn a total of  76.00  from holding ALGOMA STEEL GROUP or generate 10.22% return on investment over 90 days.

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

Dairy Farm International  vs.  ALGOMA STEEL GROUP

Dairy Farm International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dairy Farm International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dairy Farm is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Dairy Farm and ALGOMA STEEL

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

The idea behind Dairy Farm International and ALGOMA STEEL GROUP 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.