Correlation Between Algoma Steel and Kumba Iron
Can any of the company-specific risk be diversified away by investing in both Algoma Steel and Kumba Iron 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 Kumba Iron 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 Kumba Iron Ore, you can compare the effects of market volatilities on Algoma Steel and Kumba Iron 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 Kumba Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and Kumba Iron.
Diversification Opportunities for Algoma Steel and Kumba Iron
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Algoma and Kumba is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Kumba Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumba Iron Ore 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 Kumba Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumba Iron Ore has no effect on the direction of Algoma Steel i.e., Algoma Steel and Kumba Iron go up and down completely randomly.
Pair Corralation between Algoma Steel and Kumba Iron
Assuming the 90 days horizon Algoma Steel Group is expected to generate 2.71 times more return on investment than Kumba Iron. However, Algoma Steel is 2.71 times more volatile than Kumba Iron Ore. It trades about 0.17 of its potential returns per unit of risk. Kumba Iron Ore is currently generating about -0.1 per unit of risk. If you would invest 177.00 in Algoma Steel Group on August 28, 2024 and sell it today you would earn a total of 35.00 from holding Algoma Steel Group or generate 19.77% 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. Kumba Iron Ore
Performance |
| Timeline |
| Algoma Steel Group |
| Kumba Iron Ore |
Algoma Steel and Kumba Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Steel and Kumba Iron
The main advantage of trading using opposite Algoma Steel and Kumba Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, Kumba Iron 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 Kumba Iron will offset losses from the drop in Kumba Iron's long position.| Algoma Steel vs. Algoma Steel Group | Algoma Steel vs. Evolv Technologies Holdings | Algoma Steel vs. Valens Semiconductor |
| Kumba Iron vs. Labrador Iron Ore | Kumba Iron vs. Fortescue Metals Group | Kumba Iron vs. Fortescue Metals Group | Kumba Iron vs. Anhui Conch Cement |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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