Correlation Between ALGOMA STEEL and WEC Energy

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Can any of the company-specific risk be diversified away by investing in both ALGOMA STEEL and WEC Energy 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 WEC Energy 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 WEC Energy Group, you can compare the effects of market volatilities on ALGOMA STEEL and WEC Energy 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 WEC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALGOMA STEEL and WEC Energy.

Diversification Opportunities for ALGOMA STEEL and WEC Energy

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between ALGOMA and WEC is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ALGOMA STEEL GROUP and WEC Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEC Energy Group 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 WEC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEC Energy Group has no effect on the direction of ALGOMA STEEL i.e., ALGOMA STEEL and WEC Energy go up and down completely randomly.

Pair Corralation between ALGOMA STEEL and WEC Energy

Assuming the 90 days horizon ALGOMA STEEL GROUP is expected to generate 2.18 times more return on investment than WEC Energy. However, ALGOMA STEEL is 2.18 times more volatile than WEC Energy Group. It trades about 0.05 of its potential returns per unit of risk. WEC Energy Group is currently generating about 0.09 per unit of risk. If you would invest  775.00  in ALGOMA STEEL GROUP on September 12, 2024 and sell it today you would earn a total of  195.00  from holding ALGOMA STEEL GROUP or generate 25.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.6%
ValuesDaily Returns

ALGOMA STEEL GROUP  vs.  WEC Energy Group

 Performance 
       Timeline  
ALGOMA STEEL GROUP 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in ALGOMA STEEL GROUP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ALGOMA STEEL may actually be approaching a critical reversion point that can send shares even higher in January 2025.
WEC Energy Group 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in WEC Energy Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, WEC Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ALGOMA STEEL and WEC Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ALGOMA STEEL and WEC Energy

The main advantage of trading using opposite ALGOMA STEEL and WEC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALGOMA STEEL position performs unexpectedly, WEC Energy 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 WEC Energy will offset losses from the drop in WEC Energy's long position.
The idea behind ALGOMA STEEL GROUP and WEC Energy 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.

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