Correlation Between Algoma Steel and European Residential
Can any of the company-specific risk be diversified away by investing in both Algoma Steel and European Residential 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 European Residential 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 European Residential Real, you can compare the effects of market volatilities on Algoma Steel and European Residential 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 European Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and European Residential.
Diversification Opportunities for Algoma Steel and European Residential
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Algoma and European is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and European Residential Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Residential Real 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 European Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Residential Real has no effect on the direction of Algoma Steel i.e., Algoma Steel and European Residential go up and down completely randomly.
Pair Corralation between Algoma Steel and European Residential
Given the investment horizon of 90 days Algoma Steel Group is expected to generate 1.36 times more return on investment than European Residential. However, Algoma Steel is 1.36 times more volatile than European Residential Real. It trades about 0.06 of its potential returns per unit of risk. European Residential Real is currently generating about 0.04 per unit of risk. If you would invest 573.00 in Algoma Steel Group on September 3, 2024 and sell it today you would earn a total of 504.00 from holding Algoma Steel Group or generate 87.96% 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. European Residential Real
Performance |
| Timeline |
| Algoma Steel Group |
| European Residential Real |
Algoma Steel and European Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Steel and European Residential
The main advantage of trading using opposite Algoma Steel and European Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, European Residential 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 European Residential will offset losses from the drop in European Residential's long position.| Algoma Steel vs. Friedman Industries | Algoma Steel vs. ArcelorMittal SA | Algoma Steel vs. Aperam PK | Algoma Steel vs. Acerinox SA ADR |
| European Residential vs. BSR Real Estate | European Residential vs. Minto Apartment Real | European Residential vs. Nexus Real Estate | European Residential vs. Morguard North American |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |