Correlation Between GEN Restaurant and Algoma Steel

Can any of the company-specific risk be diversified away by investing in both GEN Restaurant 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 GEN Restaurant and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GEN Restaurant Group, and Algoma Steel Group, you can compare the effects of market volatilities on GEN Restaurant 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 GEN Restaurant with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEN Restaurant and Algoma Steel.

Diversification Opportunities for GEN Restaurant and Algoma Steel

0.41

Correlation Coefficient

GEN Restaurant  Algoma Steel

Very weak diversification

The 3 months correlation between GEN and Algoma is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding GEN Restaurant Group, 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 GEN Restaurant 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 GEN Restaurant Group, 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 GEN Restaurant i.e., GEN Restaurant and Algoma Steel go up and down completely randomly.

Pair Corralation between GEN Restaurant and Algoma Steel

Given the investment horizon of 90 days GEN Restaurant Group, is expected to generate 1.57 times more return on investment than Algoma Steel. However, GEN Restaurant is 1.57 times more volatile than Algoma Steel Group. It trades about -0.06 of its potential returns per unit of risk. Algoma Steel Group is currently generating about -0.39 per unit of risk. If you would invest  868.00  in GEN Restaurant Group, on September 18, 2024 and sell it today you would lose (35.00) from holding GEN Restaurant Group, or give up 4.03% of portfolio value over 90 days.

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

GEN Restaurant Group,  vs.  Algoma Steel Group

GEN Restaurant Group,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEN Restaurant Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, GEN Restaurant is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with GEN Restaurant and Algoma Steel

The main advantage of trading using opposite GEN Restaurant and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEN Restaurant 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 GEN Restaurant Group, 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.