Correlation Between Blue Owl and Algoma Steel

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

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

Diversification Opportunities for Blue Owl and Algoma Steel

-0.43

Correlation Coefficient

Blue Owl  Algoma Steel

Very good diversification

The 3 months correlation between Blue and Algoma is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Blue Owl Capital 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 Blue Owl 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 Blue Owl Capital 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 Blue Owl i.e., Blue Owl and Algoma Steel go up and down completely randomly.

Pair Corralation between Blue Owl and Algoma Steel

Given the investment horizon of 90 days Blue Owl Capital is expected to generate 0.37 times more return on investment than Algoma Steel. However, Blue Owl Capital is 2.72 times less risky than Algoma Steel. It trades about 0.01 of its potential returns per unit of risk. Algoma Steel Group is currently generating about -0.09 per unit of risk. If you would invest  1,482  in Blue Owl Capital on October 20, 2024 and sell it today you would earn a total of  2.00  from holding Blue Owl Capital or generate 0.13% return on investment over 90 days.

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

Blue Owl Capital  vs.  Algoma Steel Group

Blue Owl Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Owl Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Blue Owl is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Blue Owl and Algoma Steel

The main advantage of trading using opposite Blue Owl and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Owl 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 Blue Owl Capital 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.