Correlation Between Algoma Steel and NetEase
Can any of the company-specific risk be diversified away by investing in both Algoma Steel and NetEase 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 NetEase 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 NetEase, you can compare the effects of market volatilities on Algoma Steel and NetEase 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 NetEase. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and NetEase.
Diversification Opportunities for Algoma Steel and NetEase
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Algoma and NetEase is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase 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 NetEase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase has no effect on the direction of Algoma Steel i.e., Algoma Steel and NetEase go up and down completely randomly.
Pair Corralation between Algoma Steel and NetEase
Given the investment horizon of 90 days Algoma Steel Group is expected to generate 0.97 times more return on investment than NetEase. However, Algoma Steel Group is 1.03 times less risky than NetEase. It trades about 0.13 of its potential returns per unit of risk. NetEase is currently generating about 0.01 per unit of risk. If you would invest 729.00 in Algoma Steel Group on September 2, 2024 and sell it today you would earn a total of 348.00 from holding Algoma Steel Group or generate 47.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algoma Steel Group vs. NetEase
Performance |
| Timeline |
| Algoma Steel Group |
| NetEase |
Algoma Steel and NetEase Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Steel and NetEase
The main advantage of trading using opposite Algoma Steel and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, NetEase 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 NetEase will offset losses from the drop in NetEase's long position.| Algoma Steel vs. Friedman Industries | Algoma Steel vs. ArcelorMittal SA | Algoma Steel vs. Aperam PK | Algoma Steel vs. Acerinox SA ADR |
| NetEase vs. Roblox Corp | NetEase vs. Skillz Platform | NetEase vs. Take Two Interactive Software | NetEase vs. Nintendo Co ADR |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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