Correlation Between Algoma Steel and Canaf Investments
Can any of the company-specific risk be diversified away by investing in both Algoma Steel and Canaf Investments 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 Canaf Investments 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 Canaf Investments, you can compare the effects of market volatilities on Algoma Steel and Canaf Investments 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 Canaf Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and Canaf Investments.
Diversification Opportunities for Algoma Steel and Canaf Investments
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Algoma and Canaf is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Canaf Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaf Investments 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 Canaf Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canaf Investments has no effect on the direction of Algoma Steel i.e., Algoma Steel and Canaf Investments go up and down completely randomly.
Pair Corralation between Algoma Steel and Canaf Investments
Assuming the 90 days trading horizon Algoma Steel Group is expected to generate 0.82 times more return on investment than Canaf Investments. However, Algoma Steel Group is 1.22 times less risky than Canaf Investments. It trades about 0.03 of its potential returns per unit of risk. Canaf Investments is currently generating about -0.12 per unit of risk. If you would invest 1,476 in Algoma Steel Group on August 31, 2024 and sell it today you would earn a total of 16.00 from holding Algoma Steel Group or generate 1.08% 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. Canaf Investments
Performance |
| Timeline |
| Algoma Steel Group |
| Canaf Investments |
Algoma Steel and Canaf Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Steel and Canaf Investments
The main advantage of trading using opposite Algoma Steel and Canaf Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, Canaf Investments 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 Canaf Investments will offset losses from the drop in Canaf Investments' long position.| Algoma Steel vs. Solar Alliance Energy | Algoma Steel vs. Global X Active | Algoma Steel vs. Financial 15 Split | Algoma Steel vs. Rubicon Organics |
| Canaf Investments vs. Solar Alliance Energy | Canaf Investments vs. Global X Active | Canaf Investments vs. Financial 15 Split | Canaf Investments vs. Rubicon Organics |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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