Correlation Between TC Energy and Algoma Central

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

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

Diversification Opportunities for TC Energy and Algoma Central

0.62

Correlation Coefficient

TC Energy  Algoma Central

Poor diversification

The 3 months correlation between TRP and Algoma is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding TC Energy Corp and Algoma Central in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algoma Central and TC Energy 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 TC Energy Corp are associated (or correlated) with Algoma Central. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algoma Central has no effect on the direction of TC Energy i.e., TC Energy and Algoma Central go up and down completely randomly.

Pair Corralation between TC Energy and Algoma Central

Assuming the 90 days trading horizon TC Energy Corp is expected to generate 0.96 times more return on investment than Algoma Central. However, TC Energy Corp is 1.05 times less risky than Algoma Central. It trades about 0.21 of its potential returns per unit of risk. Algoma Central is currently generating about 0.01 per unit of risk. If you would invest  5,776  in TC Energy Corp on September 25, 2024 and sell it today you would earn a total of  861.00  from holding TC Energy Corp or generate 14.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

TC Energy Corp  vs.  Algoma Central

TC Energy Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, TC Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Algoma Central

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Algoma Central has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Algoma Central is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with TC Energy and Algoma Central

The main advantage of trading using opposite TC Energy and Algoma Central positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TC Energy position performs unexpectedly, Algoma Central 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 Central will offset losses from the drop in Algoma Central's long position.

The idea behind TC Energy Corp and Algoma Central 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.

Check out your portfolio center.

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.