Correlation Between Valens and Algoma Steel

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

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

Diversification Opportunities for Valens and Algoma Steel

-0.35

Correlation Coefficient

Valens  Algoma Steel

Very good diversification

The 3 months correlation between Valens and Algoma is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Valens 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 Valens 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 Valens 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 Valens i.e., Valens and Algoma Steel go up and down completely randomly.

Pair Corralation between Valens and Algoma Steel

Considering the 90-day investment horizon Valens is expected to generate 1.52 times less return on investment than Algoma Steel. In addition to that, Valens is 1.93 times more volatile than Algoma Steel Group. It trades about 0.03 of its total potential returns per unit of risk. Algoma Steel Group is currently generating about 0.09 per unit of volatility. If you would invest  690.00  in Algoma Steel Group on October 7, 2024 and sell it today you would earn a total of  204.00  from holding Algoma Steel Group or generate 29.57% return on investment over 90 days.

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

Valens  vs.  Algoma Steel Group

Valens

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Valens are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile essential indicators, Valens displayed 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. 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 Valens and Algoma Steel

The main advantage of trading using opposite Valens and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valens 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 Valens 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.