Correlation Between ALGOMA STEEL and TGS-NOPEC GEOPHYSIC
Can any of the company-specific risk be diversified away by investing in both ALGOMA STEEL and TGS-NOPEC GEOPHYSIC 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 TGS-NOPEC GEOPHYSIC 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 TGS NOPEC GEOPHYSIC, you can compare the effects of market volatilities on ALGOMA STEEL and TGS-NOPEC GEOPHYSIC 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 TGS-NOPEC GEOPHYSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALGOMA STEEL and TGS-NOPEC GEOPHYSIC.
Diversification Opportunities for ALGOMA STEEL and TGS-NOPEC GEOPHYSIC
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ALGOMA and TGS-NOPEC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ALGOMA STEEL GROUP and TGS NOPEC GEOPHYSIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TGS NOPEC GEOPHYSIC 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 TGS-NOPEC GEOPHYSIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TGS NOPEC GEOPHYSIC has no effect on the direction of ALGOMA STEEL i.e., ALGOMA STEEL and TGS-NOPEC GEOPHYSIC go up and down completely randomly.
Pair Corralation between ALGOMA STEEL and TGS-NOPEC GEOPHYSIC
Assuming the 90 days horizon ALGOMA STEEL is expected to generate 2.02 times less return on investment than TGS-NOPEC GEOPHYSIC. But when comparing it to its historical volatility, ALGOMA STEEL GROUP is 1.41 times less risky than TGS-NOPEC GEOPHYSIC. It trades about 0.05 of its potential returns per unit of risk. TGS NOPEC GEOPHYSIC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 831.00 in TGS NOPEC GEOPHYSIC on September 2, 2024 and sell it today you would earn a total of 100.00 from holding TGS NOPEC GEOPHYSIC or generate 12.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.48% |
| Values | Daily Returns |
ALGOMA STEEL GROUP vs. TGS NOPEC GEOPHYSIC
Performance |
| Timeline |
| ALGOMA STEEL GROUP |
| TGS NOPEC GEOPHYSIC |
ALGOMA STEEL and TGS-NOPEC GEOPHYSIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ALGOMA STEEL and TGS-NOPEC GEOPHYSIC
The main advantage of trading using opposite ALGOMA STEEL and TGS-NOPEC GEOPHYSIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALGOMA STEEL position performs unexpectedly, TGS-NOPEC GEOPHYSIC 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 TGS-NOPEC GEOPHYSIC will offset losses from the drop in TGS-NOPEC GEOPHYSIC's long position.The idea behind ALGOMA STEEL GROUP and TGS NOPEC GEOPHYSIC 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.| TGS-NOPEC GEOPHYSIC vs. The Hanover Insurance | TGS-NOPEC GEOPHYSIC vs. EHEALTH | TGS-NOPEC GEOPHYSIC vs. Ping An Insurance | TGS-NOPEC GEOPHYSIC vs. ATRYS HEALTH SA |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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