Correlation Between Algoma Steel and Leons Furniture
Can any of the company-specific risk be diversified away by investing in both Algoma Steel and Leons Furniture 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 Leons Furniture 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 Leons Furniture Limited, you can compare the effects of market volatilities on Algoma Steel and Leons Furniture 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 Leons Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and Leons Furniture.
Diversification Opportunities for Algoma Steel and Leons Furniture
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Algoma and Leons is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture 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 Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of Algoma Steel i.e., Algoma Steel and Leons Furniture go up and down completely randomly.
Pair Corralation between Algoma Steel and Leons Furniture
Assuming the 90 days trading horizon Algoma Steel Group is expected to under-perform the Leons Furniture. But the stock apears to be less risky and, when comparing its historical volatility, Algoma Steel Group is 1.22 times less risky than Leons Furniture. The stock trades about -0.43 of its potential returns per unit of risk. The Leons Furniture Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,462 in Leons Furniture Limited on November 27, 2024 and sell it today you would earn a total of 88.00 from holding Leons Furniture Limited or generate 3.57% 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. Leons Furniture Limited
Performance |
| Timeline |
| Algoma Steel Group |
| Leons Furniture |
Algoma Steel and Leons Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Steel and Leons Furniture
The main advantage of trading using opposite Algoma Steel and Leons Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, Leons Furniture 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 Leons Furniture will offset losses from the drop in Leons Furniture'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 |
| Leons Furniture vs. High Liner Foods | Leons Furniture vs. Richelieu Hardware | Leons Furniture vs. North West | Leons Furniture vs. Toromont Industries |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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