Correlation Between Algoma Steel and Leading Edge
Can any of the company-specific risk be diversified away by investing in both Algoma Steel and Leading Edge 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 Leading Edge 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 Leading Edge Materials, you can compare the effects of market volatilities on Algoma Steel and Leading Edge 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 Leading Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and Leading Edge.
Diversification Opportunities for Algoma Steel and Leading Edge
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Algoma and Leading is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Leading Edge Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leading Edge Materials 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 Leading Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leading Edge Materials has no effect on the direction of Algoma Steel i.e., Algoma Steel and Leading Edge go up and down completely randomly.
Pair Corralation between Algoma Steel and Leading Edge
Given the investment horizon of 90 days Algoma Steel Group is expected to generate 0.6 times more return on investment than Leading Edge. However, Algoma Steel Group is 1.68 times less risky than Leading Edge. It trades about 0.08 of its potential returns per unit of risk. Leading Edge Materials is currently generating about -0.03 per unit of risk. If you would invest 1,037 in Algoma Steel Group on September 3, 2024 and sell it today you would earn a total of 40.00 from holding Algoma Steel Group or generate 3.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Algoma Steel Group vs. Leading Edge Materials
Performance |
| Timeline |
| Algoma Steel Group |
| Leading Edge Materials |
Algoma Steel and Leading Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Steel and Leading Edge
The main advantage of trading using opposite Algoma Steel and Leading Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, Leading Edge 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 Leading Edge will offset losses from the drop in Leading Edge's long position.| Algoma Steel vs. Friedman Industries | Algoma Steel vs. ArcelorMittal SA | Algoma Steel vs. Aperam PK | Algoma Steel vs. Acerinox SA ADR |
| Leading Edge vs. Algoma Steel Group | Leading Edge vs. Champion Iron | Leading Edge vs. International Zeolite Corp | Leading Edge vs. European Residential Real |
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 Directory module to find actively traded commodities issued by global exchanges.
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