Correlation Between PT Steel and ALGOMA STEEL

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

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

Diversification Opportunities for PT Steel and ALGOMA STEEL

-0.47

Correlation Coefficient

PT Steel  ALGOMA STEEL

Very good diversification

The 3 months correlation between S08 and ALGOMA is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding PT Steel Pipe 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 PT 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 PT Steel Pipe 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 PT Steel i.e., PT Steel and ALGOMA STEEL go up and down completely randomly.

Pair Corralation between PT Steel and ALGOMA STEEL

Assuming the 90 days horizon PT Steel Pipe is expected to generate 2.05 times more return on investment than ALGOMA STEEL. However, PT Steel is 2.05 times more volatile than ALGOMA STEEL GROUP. It trades about 0.04 of its potential returns per unit of risk. ALGOMA STEEL GROUP is currently generating about 0.03 per unit of risk. If you would invest  1.40  in PT Steel Pipe on October 10, 2024 and sell it today you would earn a total of  0.05  from holding PT Steel Pipe or generate 3.57% return on investment over 90 days.

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

PT Steel Pipe  vs.  ALGOMA STEEL GROUP

PT Steel Pipe

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Steel Pipe are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Steel reported solid returns over the last few months and may actually be approaching a breakup point.

ALGOMA STEEL GROUP

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ALGOMA STEEL GROUP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ALGOMA STEEL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Steel and ALGOMA STEEL

The main advantage of trading using opposite PT Steel and ALGOMA STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Steel 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 PT Steel Pipe 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.