Correlation Between Algoma Steel and Kaiser Aluminum
Can any of the company-specific risk be diversified away by investing in both Algoma Steel and Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum, you can compare the effects of market volatilities on Algoma Steel and Kaiser Aluminum 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 Kaiser Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and Kaiser Aluminum.
Diversification Opportunities for Algoma Steel and Kaiser Aluminum
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Algoma and Kaiser is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of Algoma Steel i.e., Algoma Steel and Kaiser Aluminum go up and down completely randomly.
Pair Corralation between Algoma Steel and Kaiser Aluminum
Given the investment horizon of 90 days Algoma Steel Group is expected to under-perform the Kaiser Aluminum. In addition to that, Algoma Steel is 1.44 times more volatile than Kaiser Aluminum. It trades about -0.2 of its total potential returns per unit of risk. Kaiser Aluminum is currently generating about -0.15 per unit of volatility. If you would invest 7,359 in Kaiser Aluminum on January 16, 2025 and sell it today you would lose (1,898) from holding Kaiser Aluminum or give up 25.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algoma Steel Group vs. Kaiser Aluminum
Performance |
| Timeline |
| Algoma Steel Group |
| Kaiser Aluminum |
Algoma Steel and Kaiser Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Steel and Kaiser Aluminum
The main advantage of trading using opposite Algoma Steel and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, Kaiser Aluminum 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 Kaiser Aluminum will offset losses from the drop in Kaiser Aluminum's long position.| Algoma Steel vs. Friedman Industries Common | Algoma Steel vs. ArcelorMittal SA | Algoma Steel vs. Aperam PK | Algoma Steel vs. Acerinox SA ADR |
| Kaiser Aluminum vs. Century Aluminum | Kaiser Aluminum vs. China Hongqiao Group | Kaiser Aluminum vs. Constellium Nv | Kaiser Aluminum vs. Alcoa Corp |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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