Correlation Between Algoma Steel and Homerun Resources
Can any of the company-specific risk be diversified away by investing in both Algoma Steel and Homerun Resources 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 Homerun Resources 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 Homerun Resources, you can compare the effects of market volatilities on Algoma Steel and Homerun Resources 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 Homerun Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and Homerun Resources.
Diversification Opportunities for Algoma Steel and Homerun Resources
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Algoma and Homerun is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Homerun Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homerun Resources 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 Homerun Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homerun Resources has no effect on the direction of Algoma Steel i.e., Algoma Steel and Homerun Resources go up and down completely randomly.
Pair Corralation between Algoma Steel and Homerun Resources
Assuming the 90 days trading horizon Algoma Steel Group is expected to generate 0.52 times more return on investment than Homerun Resources. However, Algoma Steel Group is 1.93 times less risky than Homerun Resources. It trades about -0.13 of its potential returns per unit of risk. Homerun Resources is currently generating about -0.21 per unit of risk. If you would invest 1,263 in Algoma Steel Group on November 7, 2024 and sell it today you would lose (79.00) from holding Algoma Steel Group or give up 6.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 91.3% |
| Values | Daily Returns |
Algoma Steel Group vs. Homerun Resources
Performance |
| Timeline |
| Algoma Steel Group |
| Homerun Resources |
Algoma Steel and Homerun Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Steel and Homerun Resources
The main advantage of trading using opposite Algoma Steel and Homerun Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, Homerun Resources 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 Homerun Resources will offset losses from the drop in Homerun Resources' 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 |
| Homerun Resources vs. DIRTT Environmental Solutions | Homerun Resources vs. Cogeco Communications | Homerun Resources vs. Algoma Steel Group | Homerun Resources vs. Maple Peak Investments |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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