Correlation Between Algoma Steel and NEXE Innovations
Can any of the company-specific risk be diversified away by investing in both Algoma Steel and NEXE Innovations 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 NEXE Innovations 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 NEXE Innovations, you can compare the effects of market volatilities on Algoma Steel and NEXE Innovations 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 NEXE Innovations. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and NEXE Innovations.
Diversification Opportunities for Algoma Steel and NEXE Innovations
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Algoma and NEXE is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and NEXE Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXE Innovations 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 NEXE Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXE Innovations has no effect on the direction of Algoma Steel i.e., Algoma Steel and NEXE Innovations go up and down completely randomly.
Pair Corralation between Algoma Steel and NEXE Innovations
Given the investment horizon of 90 days Algoma Steel is expected to generate 8.07 times less return on investment than NEXE Innovations. But when comparing it to its historical volatility, Algoma Steel Group is 2.02 times less risky than NEXE Innovations. It trades about 0.02 of its potential returns per unit of risk. NEXE Innovations is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 32.00 in NEXE Innovations on September 12, 2024 and sell it today you would earn a total of 7.00 from holding NEXE Innovations or generate 21.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algoma Steel Group vs. NEXE Innovations
Performance |
| Timeline |
| Algoma Steel Group |
| NEXE Innovations |
Algoma Steel and NEXE Innovations Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Steel and NEXE Innovations
The main advantage of trading using opposite Algoma Steel and NEXE Innovations positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, NEXE Innovations 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 NEXE Innovations will offset losses from the drop in NEXE Innovations' long position.| Algoma Steel vs. Friedman Industries | Algoma Steel vs. ArcelorMittal SA | Algoma Steel vs. Aperam PK | Algoma Steel vs. Acerinox SA ADR |
| NEXE Innovations vs. Ressources Minieres Radisson | NEXE Innovations vs. Galantas Gold Corp | NEXE Innovations vs. Red Pine Exploration | NEXE Innovations vs. Kore Mining |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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