Correlation Between Galway Metals and Algoma Steel
Can any of the company-specific risk be diversified away by investing in both Galway Metals 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 Galway Metals and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Galway Metals and Algoma Steel Group, you can compare the effects of market volatilities on Galway Metals 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 Galway Metals with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Galway Metals and Algoma Steel.
Diversification Opportunities for Galway Metals and Algoma Steel
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Galway and Algoma is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Galway Metals 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 Galway Metals 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 Galway Metals 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 Galway Metals i.e., Galway Metals and Algoma Steel go up and down completely randomly.
Pair Corralation between Galway Metals and Algoma Steel
Assuming the 90 days horizon Galway Metals is expected to generate 1.87 times more return on investment than Algoma Steel. However, Galway Metals is 1.87 times more volatile than Algoma Steel Group. It trades about 0.06 of its potential returns per unit of risk. Algoma Steel Group is currently generating about 0.04 per unit of risk. If you would invest 48.00 in Galway Metals on September 4, 2024 and sell it today you would earn a total of 2.00 from holding Galway Metals or generate 4.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Galway Metals vs. Algoma Steel Group
Performance |
| Timeline |
| Galway Metals |
| Algoma Steel Group |
Galway Metals and Algoma Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Galway Metals and Algoma Steel
The main advantage of trading using opposite Galway Metals and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Galway Metals 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.| Galway Metals vs. First Majestic Silver | Galway Metals vs. Ivanhoe Energy | Galway Metals vs. Orezone Gold Corp | Galway Metals vs. Faraday Copper Corp |
| Algoma Steel vs. Friedman Industries | Algoma Steel vs. Algoma Steel Group | Algoma Steel vs. Reliance Steel Aluminum | Algoma Steel vs. Universal Stainless Alloy |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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