Correlation Between LENSAR and Algoma Steel

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

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

Diversification Opportunities for LENSAR and Algoma Steel

-0.33

Correlation Coefficient

LENSAR  Algoma Steel

Very good diversification

The 3 months correlation between LENSAR and Algoma is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding LENSAR Inc 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 LENSAR 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 LENSAR Inc 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 LENSAR i.e., LENSAR and Algoma Steel go up and down completely randomly.

Pair Corralation between LENSAR and Algoma Steel

Given the investment horizon of 90 days LENSAR Inc is expected to generate 2.04 times more return on investment than Algoma Steel. However, LENSAR is 2.04 times more volatile than Algoma Steel Group. It trades about 0.1 of its potential returns per unit of risk. Algoma Steel Group is currently generating about 0.01 per unit of risk. If you would invest  335.00  in LENSAR Inc on October 24, 2024 and sell it today you would earn a total of  498.00  from holding LENSAR Inc or generate 148.66% return on investment over 90 days.

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

LENSAR Inc  vs.  Algoma Steel Group

LENSAR Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LENSAR Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, LENSAR reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with LENSAR and Algoma Steel

The main advantage of trading using opposite LENSAR and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LENSAR 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 LENSAR Inc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.