Correlation Between Westrock Coffee and Algoma Steel

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

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

Diversification Opportunities for Westrock Coffee and Algoma Steel

-0.15

Correlation Coefficient

Westrock Coffee  Algoma Steel

Good diversification

The 3 months correlation between Westrock and Algoma is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Westrock Coffee 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 Westrock Coffee 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 Westrock Coffee 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 Westrock Coffee i.e., Westrock Coffee and Algoma Steel go up and down completely randomly.

Pair Corralation between Westrock Coffee and Algoma Steel

Assuming the 90 days horizon Westrock Coffee is expected to generate 13.71 times more return on investment than Algoma Steel. However, Westrock Coffee is 13.71 times more volatile than Algoma Steel Group. It trades about 0.06 of its potential returns per unit of risk. Algoma Steel Group is currently generating about 0.04 per unit of risk. If you would invest  225.00  in Westrock Coffee on September 3, 2024 and sell it today you would lose (33.00) from holding Westrock Coffee or give up 14.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.28%
Values	Daily Returns

Westrock Coffee  vs.  Algoma Steel Group

Westrock Coffee

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westrock Coffee has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Westrock Coffee is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Algoma Steel Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Algoma Steel Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Algoma Steel showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westrock Coffee and Algoma Steel

The main advantage of trading using opposite Westrock Coffee and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westrock Coffee 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 Westrock Coffee 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.