Correlation Between Algoma Steel and CVS HEALTH
Can any of the company-specific risk be diversified away by investing in both Algoma Steel and CVS HEALTH 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 CVS HEALTH 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 CVS HEALTH CDR, you can compare the effects of market volatilities on Algoma Steel and CVS HEALTH 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 CVS HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and CVS HEALTH.
Diversification Opportunities for Algoma Steel and CVS HEALTH
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Algoma and CVS is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and CVS HEALTH CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS HEALTH CDR 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 CVS HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS HEALTH CDR has no effect on the direction of Algoma Steel i.e., Algoma Steel and CVS HEALTH go up and down completely randomly.
Pair Corralation between Algoma Steel and CVS HEALTH
Assuming the 90 days trading horizon Algoma Steel Group is expected to under-perform the CVS HEALTH. In addition to that, Algoma Steel is 1.19 times more volatile than CVS HEALTH CDR. It trades about -0.28 of its total potential returns per unit of risk. CVS HEALTH CDR is currently generating about 0.49 per unit of volatility. If you would invest 1,100 in CVS HEALTH CDR on October 24, 2024 and sell it today you would earn a total of 218.00 from holding CVS HEALTH CDR or generate 19.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algoma Steel Group vs. CVS HEALTH CDR
Performance |
| Timeline |
| Algoma Steel Group |
| CVS HEALTH CDR |
Algoma Steel and CVS HEALTH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Steel and CVS HEALTH
The main advantage of trading using opposite Algoma Steel and CVS HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, CVS HEALTH 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 CVS HEALTH will offset losses from the drop in CVS HEALTH's long position.| Algoma Steel vs. Algoma Steel Group | Algoma Steel vs. Champion Iron | Algoma Steel vs. Ero Copper Corp | Algoma Steel vs. West Fraser Timber |
| CVS HEALTH vs. Ramp Metals | CVS HEALTH vs. Algoma Steel Group | CVS HEALTH vs. Mako Mining Corp | CVS HEALTH vs. Gfl Environmental Holdings |
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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