Correlation Between Canadian Utilities and ALGOMA STEEL
Can any of the company-specific risk be diversified away by investing in both Canadian 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 Canadian 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 Canadian Utilities Limited and ALGOMA STEEL GROUP, you can compare the effects of market volatilities on Canadian 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 Canadian Utilities with a short position of ALGOMA STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and ALGOMA STEEL.
Diversification Opportunities for Canadian Utilities and ALGOMA STEEL
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Canadian and ALGOMA is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited 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 Canadian 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 Canadian Utilities Limited 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 Canadian Utilities i.e., Canadian Utilities and ALGOMA STEEL go up and down completely randomly.
Pair Corralation between Canadian Utilities and ALGOMA STEEL
Assuming the 90 days horizon Canadian Utilities Limited is expected to generate 0.41 times more return on investment than ALGOMA STEEL. However, Canadian Utilities Limited is 2.43 times less risky than ALGOMA STEEL. It trades about 0.22 of its potential returns per unit of risk. ALGOMA STEEL GROUP is currently generating about -0.44 per unit of risk. If you would invest 2,223 in Canadian Utilities Limited on November 29, 2024 and sell it today you would earn a total of 83.00 from holding Canadian Utilities Limited or generate 3.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Utilities Limited vs. ALGOMA STEEL GROUP
Performance |
| Timeline |
| Canadian Utilities |
| ALGOMA STEEL GROUP |
Canadian Utilities and ALGOMA STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and ALGOMA STEEL
The main advantage of trading using opposite Canadian Utilities and ALGOMA STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian 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.| Canadian Utilities vs. MAVEN WIRELESS SWEDEN | Canadian Utilities vs. CITY OFFICE REIT | Canadian Utilities vs. PKSHA TECHNOLOGY INC | Canadian Utilities vs. Tower One Wireless |
| ALGOMA STEEL vs. ASURE SOFTWARE | ALGOMA STEEL vs. China Datang | ALGOMA STEEL vs. Take Two Interactive Software | ALGOMA STEEL vs. Alliance Data Systems |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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