Correlation Between Global X and Algoma Steel

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Can any of the company-specific risk be diversified away by investing in both Global X 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 Global X and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Active and Algoma Steel Group, you can compare the effects of market volatilities on Global X 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 Global X with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Algoma Steel.

Diversification Opportunities for Global X and Algoma Steel

-0.39
  Correlation Coefficient

Very good diversification

The 3 months correlation between Global and Algoma is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Global X Active 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 Global X 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 Global X Active 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 Global X i.e., Global X and Algoma Steel go up and down completely randomly.

Pair Corralation between Global X and Algoma Steel

Assuming the 90 days trading horizon Global X is expected to generate 1.31 times less return on investment than Algoma Steel. But when comparing it to its historical volatility, Global X Active is 5.79 times less risky than Algoma Steel. It trades about 0.14 of its potential returns per unit of risk. Algoma Steel Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,476  in Algoma Steel Group on August 31, 2024 and sell it today you would earn a total of  16.00  from holding Algoma Steel Group or generate 1.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Global X Active  vs.  Algoma Steel Group

 Performance 
       Timeline  
Global X Active 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Global X Active are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Algoma Steel Group 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Algoma Steel Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Algoma Steel may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Global X and Algoma Steel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Global X and Algoma Steel

The main advantage of trading using opposite Global X and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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.
The idea behind Global X Active and Algoma Steel Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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