Correlation Between ALGOMA STEEL and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both ALGOMA STEEL and Algonquin Power 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 ALGOMA STEEL and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ALGOMA STEEL GROUP and Algonquin Power Utilities, you can compare the effects of market volatilities on ALGOMA STEEL and Algonquin Power 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 ALGOMA STEEL with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALGOMA STEEL and Algonquin Power.
Diversification Opportunities for ALGOMA STEEL and Algonquin Power
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ALGOMA and Algonquin is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding ALGOMA STEEL GROUP and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities and ALGOMA STEEL 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 ALGOMA STEEL GROUP are associated (or correlated) with Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of ALGOMA STEEL i.e., ALGOMA STEEL and Algonquin Power go up and down completely randomly.
Pair Corralation between ALGOMA STEEL and Algonquin Power
Assuming the 90 days horizon ALGOMA STEEL GROUP is expected to generate 1.56 times more return on investment than Algonquin Power. However, ALGOMA STEEL is 1.56 times more volatile than Algonquin Power Utilities. It trades about 0.05 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about -0.01 per unit of risk. If you would invest 945.00 in ALGOMA STEEL GROUP on September 3, 2024 and sell it today you would earn a total of 55.00 from holding ALGOMA STEEL GROUP or generate 5.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ALGOMA STEEL GROUP vs. Algonquin Power Utilities
Performance |
| Timeline |
| ALGOMA STEEL GROUP |
| Algonquin Power Utilities |
ALGOMA STEEL and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ALGOMA STEEL and Algonquin Power
The main advantage of trading using opposite ALGOMA STEEL and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALGOMA STEEL position performs unexpectedly, Algonquin Power 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 Algonquin Power will offset losses from the drop in Algonquin Power's long position.| ALGOMA STEEL vs. ArcelorMittal | ALGOMA STEEL vs. Steel Dynamics | ALGOMA STEEL vs. NIPPON STEEL SPADR | ALGOMA STEEL vs. POSCO Holdings |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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