Correlation Between Algoma Steel and Mesabi Trust
Can any of the company-specific risk be diversified away by investing in both Algoma Steel and Mesabi Trust 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 Mesabi Trust 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 Mesabi Trust, you can compare the effects of market volatilities on Algoma Steel and Mesabi Trust 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 Mesabi Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and Mesabi Trust.
Diversification Opportunities for Algoma Steel and Mesabi Trust
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Algoma and Mesabi is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Mesabi Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesabi Trust 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 Mesabi Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesabi Trust has no effect on the direction of Algoma Steel i.e., Algoma Steel and Mesabi Trust go up and down completely randomly.
Pair Corralation between Algoma Steel and Mesabi Trust
Assuming the 90 days horizon Algoma Steel Group is expected to generate 3.3 times more return on investment than Mesabi Trust. However, Algoma Steel is 3.3 times more volatile than Mesabi Trust. It trades about 0.27 of its potential returns per unit of risk. Mesabi Trust is currently generating about 0.23 per unit of risk. If you would invest 164.00 in Algoma Steel Group on August 24, 2024 and sell it today you would earn a total of 61.00 from holding Algoma Steel Group or generate 37.2% 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. Mesabi Trust
Performance |
| Timeline |
| Algoma Steel Group |
| Mesabi Trust |
Algoma Steel and Mesabi Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Steel and Mesabi Trust
The main advantage of trading using opposite Algoma Steel and Mesabi Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, Mesabi Trust 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 Mesabi Trust will offset losses from the drop in Mesabi Trust's long position.| Algoma Steel vs. Algoma Steel Group | Algoma Steel vs. Evolv Technologies Holdings | Algoma Steel vs. Valens Semiconductor |
| Mesabi Trust vs. Olympic Steel | Mesabi Trust vs. Universal Stainless Alloy | Mesabi Trust vs. POSCO Holdings | Mesabi Trust vs. Outokumpu Oyj 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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