Correlation Between ALGOMA STEEL and COMPASS GROUP
Can any of the company-specific risk be diversified away by investing in both ALGOMA STEEL and COMPASS GROUP 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 COMPASS GROUP 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 COMPASS GROUP, you can compare the effects of market volatilities on ALGOMA STEEL and COMPASS GROUP 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 COMPASS GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALGOMA STEEL and COMPASS GROUP.
Diversification Opportunities for ALGOMA STEEL and COMPASS GROUP
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ALGOMA and COMPASS is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ALGOMA STEEL GROUP and COMPASS GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMPASS 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 COMPASS GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMPASS GROUP has no effect on the direction of ALGOMA STEEL i.e., ALGOMA STEEL and COMPASS GROUP go up and down completely randomly.
Pair Corralation between ALGOMA STEEL and COMPASS GROUP
Assuming the 90 days horizon ALGOMA STEEL GROUP is expected to generate 1.91 times more return on investment than COMPASS GROUP. However, ALGOMA STEEL is 1.91 times more volatile than COMPASS GROUP. It trades about 0.09 of its potential returns per unit of risk. COMPASS GROUP is currently generating about 0.09 per unit of risk. If you would invest 638.00 in ALGOMA STEEL GROUP on August 24, 2024 and sell it today you would earn a total of 422.00 from holding ALGOMA STEEL GROUP or generate 66.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ALGOMA STEEL GROUP vs. COMPASS GROUP
Performance |
| Timeline |
| ALGOMA STEEL GROUP |
| COMPASS GROUP |
ALGOMA STEEL and COMPASS GROUP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ALGOMA STEEL and COMPASS GROUP
The main advantage of trading using opposite ALGOMA STEEL and COMPASS GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALGOMA STEEL position performs unexpectedly, COMPASS GROUP 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 COMPASS GROUP will offset losses from the drop in COMPASS GROUP's long position.| ALGOMA STEEL vs. QIIWI GAMES AB | ALGOMA STEEL vs. COPLAND ROAD CAPITAL | ALGOMA STEEL vs. QUEEN S ROAD | ALGOMA STEEL vs. Scientific Games |
| COMPASS GROUP vs. NIPPON STEEL SPADR | COMPASS GROUP vs. BLUESCOPE STEEL | COMPASS GROUP vs. ALGOMA STEEL GROUP | COMPASS GROUP vs. Southwest Airlines Co |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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