Correlation Between ALGOMA STEEL and NIPPON STEEL
Can any of the company-specific risk be diversified away by investing in both ALGOMA STEEL and NIPPON 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 ALGOMA STEEL and NIPPON STEEL 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 NIPPON STEEL SPADR, you can compare the effects of market volatilities on ALGOMA STEEL and NIPPON 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 ALGOMA STEEL with a short position of NIPPON STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALGOMA STEEL and NIPPON STEEL.
Diversification Opportunities for ALGOMA STEEL and NIPPON STEEL
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ALGOMA and NIPPON is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding ALGOMA STEEL GROUP and NIPPON STEEL SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIPPON STEEL SPADR 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 NIPPON STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIPPON STEEL SPADR has no effect on the direction of ALGOMA STEEL i.e., ALGOMA STEEL and NIPPON STEEL go up and down completely randomly.
Pair Corralation between ALGOMA STEEL and NIPPON STEEL
Assuming the 90 days horizon ALGOMA STEEL GROUP is expected to generate 2.35 times more return on investment than NIPPON STEEL. However, ALGOMA STEEL is 2.35 times more volatile than NIPPON STEEL SPADR. It trades about 0.3 of its potential returns per unit of risk. NIPPON STEEL SPADR is currently generating about 0.21 per unit of risk. If you would invest 890.00 in ALGOMA STEEL GROUP on August 26, 2024 and sell it today you would earn a total of 190.00 from holding ALGOMA STEEL GROUP or generate 21.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ALGOMA STEEL GROUP vs. NIPPON STEEL SPADR
Performance |
| Timeline |
| ALGOMA STEEL GROUP |
| NIPPON STEEL SPADR |
ALGOMA STEEL and NIPPON STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ALGOMA STEEL and NIPPON STEEL
The main advantage of trading using opposite ALGOMA STEEL and NIPPON STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALGOMA STEEL position performs unexpectedly, NIPPON 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 NIPPON STEEL will offset losses from the drop in NIPPON STEEL's long position.| ALGOMA STEEL vs. CVR Medical Corp | ALGOMA STEEL vs. MSAD INSURANCE | ALGOMA STEEL vs. SBI Insurance Group | ALGOMA STEEL vs. QBE Insurance Group |
| NIPPON STEEL vs. Harmony Gold Mining | NIPPON STEEL vs. COMPUTERSHARE | NIPPON STEEL vs. Entravision Communications | NIPPON STEEL vs. Charter Communications |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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