Correlation Between Algoma Steel and Western Asset
Can any of the company-specific risk be diversified away by investing in both Algoma Steel and Western Asset 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 Western Asset 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 Western Asset Investment, you can compare the effects of market volatilities on Algoma Steel and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and Western Asset.
Diversification Opportunities for Algoma Steel and Western Asset
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Algoma and Western is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Western Asset Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Investment 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Investment has no effect on the direction of Algoma Steel i.e., Algoma Steel and Western Asset go up and down completely randomly.
Pair Corralation between Algoma Steel and Western Asset
Given the investment horizon of 90 days Algoma Steel Group is expected to generate 2.91 times more return on investment than Western Asset. However, Algoma Steel is 2.91 times more volatile than Western Asset Investment. It trades about 0.06 of its potential returns per unit of risk. Western Asset Investment is currently generating about 0.03 per unit of risk. If you would invest 586.00 in Algoma Steel Group on August 30, 2024 and sell it today you would earn a total of 481.00 from holding Algoma Steel Group or generate 82.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Algoma Steel Group vs. Western Asset Investment
Performance |
| Timeline |
| Algoma Steel Group |
| Western Asset Investment |
Algoma Steel and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Steel and Western Asset
The main advantage of trading using opposite Algoma Steel and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Algoma Steel vs. Paramount Gold Nevada | Algoma Steel vs. Liberty Gold Corp | Algoma Steel vs. GoldMining | Algoma Steel vs. International Tower Hill |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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