Correlation Between Chesapeake Utilities and ALGOMA STEEL
Can any of the company-specific risk be diversified away by investing in both Chesapeake Utilities and ALGOMA STEEL 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 Chesapeake Utilities and ALGOMA STEEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chesapeake Utilities and ALGOMA STEEL GROUP, you can compare the effects of market volatilities on Chesapeake Utilities and ALGOMA STEEL 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 Chesapeake Utilities with a short position of ALGOMA STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chesapeake Utilities and ALGOMA STEEL.
Diversification Opportunities for Chesapeake Utilities and ALGOMA STEEL
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chesapeake and ALGOMA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and ALGOMA STEEL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALGOMA STEEL GROUP and Chesapeake Utilities 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 Chesapeake Utilities are associated (or correlated) with ALGOMA STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALGOMA STEEL GROUP has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and ALGOMA STEEL go up and down completely randomly.
Pair Corralation between Chesapeake Utilities and ALGOMA STEEL
Assuming the 90 days horizon Chesapeake Utilities is expected to generate 4.03 times less return on investment than ALGOMA STEEL. But when comparing it to its historical volatility, Chesapeake Utilities is 1.74 times less risky than ALGOMA STEEL. It trades about 0.03 of its potential returns per unit of risk. ALGOMA STEEL GROUP is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 545.00 in ALGOMA STEEL GROUP on September 3, 2024 and sell it today you would earn a total of 455.00 from holding ALGOMA STEEL GROUP or generate 83.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chesapeake Utilities vs. ALGOMA STEEL GROUP
Performance |
| Timeline |
| Chesapeake Utilities |
| ALGOMA STEEL GROUP |
Chesapeake Utilities and ALGOMA STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chesapeake Utilities and ALGOMA STEEL
The main advantage of trading using opposite Chesapeake Utilities and ALGOMA STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chesapeake Utilities position performs unexpectedly, ALGOMA STEEL 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 ALGOMA STEEL will offset losses from the drop in ALGOMA STEEL's long position.| Chesapeake Utilities vs. ENN Energy Holdings | Chesapeake Utilities vs. Superior Plus Corp | Chesapeake Utilities vs. NMI Holdings | Chesapeake Utilities vs. Origin Agritech |
| ALGOMA STEEL vs. ArcelorMittal | ALGOMA STEEL vs. Steel Dynamics | ALGOMA STEEL vs. NIPPON STEEL SPADR | ALGOMA STEEL vs. POSCO Holdings |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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