Correlation Between CONSOLIDATED and Algoma Steel

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

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

Diversification Opportunities for CONSOLIDATED and Algoma Steel

0.7

Correlation Coefficient

CONSOLIDATED  Algoma Steel

Poor diversification

The 3 months correlation between CONSOLIDATED and Algoma is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding CONSOLIDATED EDISON N 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 CONSOLIDATED 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 CONSOLIDATED EDISON N 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 CONSOLIDATED i.e., CONSOLIDATED and Algoma Steel go up and down completely randomly.

Pair Corralation between CONSOLIDATED and Algoma Steel

Assuming the 90 days trading horizon CONSOLIDATED EDISON N is expected to generate 0.35 times more return on investment than Algoma Steel. However, CONSOLIDATED EDISON N is 2.85 times less risky than Algoma Steel. It trades about -0.33 of its potential returns per unit of risk. Algoma Steel Group is currently generating about -0.35 per unit of risk. If you would invest  9,768  in CONSOLIDATED EDISON N on October 9, 2024 and sell it today you would lose (212.00) from holding CONSOLIDATED EDISON N or give up 2.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	42.11%
Values	Daily Returns

CONSOLIDATED EDISON N  vs.  Algoma Steel Group

CONSOLIDATED EDISON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSOLIDATED EDISON N has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CONSOLIDATED EDISON N investors.

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 CONSOLIDATED and Algoma Steel

The main advantage of trading using opposite CONSOLIDATED and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CONSOLIDATED 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 CONSOLIDATED EDISON N 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.