Correlation Between Sparx Technology and Algoma Steel

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

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

Diversification Opportunities for Sparx Technology and Algoma Steel

-0.66

Correlation Coefficient

Sparx Technology  Algoma Steel

Excellent diversification

The 3 months correlation between Sparx and Algoma is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sparx Technology 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 Sparx Technology 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 Sparx Technology 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 Sparx Technology i.e., Sparx Technology and Algoma Steel go up and down completely randomly.

Pair Corralation between Sparx Technology and Algoma Steel

Assuming the 90 days trading horizon Sparx Technology is expected to generate 1.22 times more return on investment than Algoma Steel. However, Sparx Technology is 1.22 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 -0.28 per unit of risk. If you would invest  2,872  in Sparx Technology on October 26, 2024 and sell it today you would earn a total of  136.00  from holding Sparx Technology or generate 4.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Sparx Technology  vs.  Algoma Steel Group

Sparx Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparx Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Sparx Technology showed 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. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Sparx Technology and Algoma Steel

The main advantage of trading using opposite Sparx Technology and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparx Technology 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 Sparx Technology 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..