Correlation Between Algoma Steel and American Hotel
Can any of the company-specific risk be diversified away by investing in both Algoma Steel and American Hotel 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 American Hotel 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 American Hotel Income, you can compare the effects of market volatilities on Algoma Steel and American Hotel 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 American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and American Hotel.
Diversification Opportunities for Algoma Steel and American Hotel
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Algoma and American is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income 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 American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of Algoma Steel i.e., Algoma Steel and American Hotel go up and down completely randomly.
Pair Corralation between Algoma Steel and American Hotel
Assuming the 90 days trading horizon Algoma Steel Group is expected to generate 0.53 times more return on investment than American Hotel. However, Algoma Steel Group is 1.88 times less risky than American Hotel. It trades about 0.07 of its potential returns per unit of risk. American Hotel Income is currently generating about -0.01 per unit of risk. If you would invest 1,127 in Algoma Steel Group on August 26, 2024 and sell it today you would earn a total of 444.00 from holding Algoma Steel Group or generate 39.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algoma Steel Group vs. American Hotel Income
Performance |
| Timeline |
| Algoma Steel Group |
| American Hotel Income |
Algoma Steel and American Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Steel and American Hotel
The main advantage of trading using opposite Algoma Steel and American Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, American Hotel 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 American Hotel will offset losses from the drop in American Hotel'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 |
| American Hotel vs. Berkshire Hathaway CDR | American Hotel vs. Microsoft Corp CDR | American Hotel vs. Apple Inc CDR | American Hotel vs. Alphabet Inc CDR |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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