Correlation Between Algoma Steel and Ternium SA
Can any of the company-specific risk be diversified away by investing in both Algoma Steel and Ternium SA 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 Ternium SA 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 Ternium SA ADR, you can compare the effects of market volatilities on Algoma Steel and Ternium SA 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 Ternium SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and Ternium SA.
Diversification Opportunities for Algoma Steel and Ternium SA
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Algoma and Ternium is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Ternium SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ternium SA ADR 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 Ternium SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ternium SA ADR has no effect on the direction of Algoma Steel i.e., Algoma Steel and Ternium SA go up and down completely randomly.
Pair Corralation between Algoma Steel and Ternium SA
Assuming the 90 days horizon Algoma Steel Group is expected to generate 3.15 times more return on investment than Ternium SA. However, Algoma Steel is 3.15 times more volatile than Ternium SA ADR. It trades about 0.01 of its potential returns per unit of risk. Ternium SA ADR is currently generating about -0.04 per unit of risk. If you would invest 160.00 in Algoma Steel Group on November 9, 2024 and sell it today you would lose (30.00) from holding Algoma Steel Group or give up 18.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
Algoma Steel Group vs. Ternium SA ADR
Performance |
| Timeline |
| Algoma Steel Group |
| Ternium SA ADR |
Algoma Steel and Ternium SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Steel and Ternium SA
The main advantage of trading using opposite Algoma Steel and Ternium SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, Ternium SA 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 Ternium SA will offset losses from the drop in Ternium SA's long position.| Algoma Steel vs. Algoma Steel Group | Algoma Steel vs. Evolv Technologies Holdings | Algoma Steel vs. Valens Semiconductor |
| Ternium SA vs. POSCO Holdings | Ternium SA vs. Steel Dynamics | Ternium SA vs. Gerdau SA ADR | Ternium SA vs. Nucor Corp |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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