Correlation Between Insteel Industries and Algoma Steel
Can any of the company-specific risk be diversified away by investing in both Insteel Industries 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 Insteel Industries and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insteel Industries and Algoma Steel Group, you can compare the effects of market volatilities on Insteel Industries 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 Insteel Industries with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insteel Industries and Algoma Steel.
Diversification Opportunities for Insteel Industries and Algoma Steel
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Insteel and Algoma is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries 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 Insteel Industries 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 Insteel Industries 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 Insteel Industries i.e., Insteel Industries and Algoma Steel go up and down completely randomly.
Pair Corralation between Insteel Industries and Algoma Steel
Given the investment horizon of 90 days Insteel Industries is expected to generate 2.94 times less return on investment than Algoma Steel. But when comparing it to its historical volatility, Insteel Industries is 1.36 times less risky than Algoma Steel. It trades about 0.12 of its potential returns per unit of risk. Algoma Steel Group is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 957.00 in Algoma Steel Group on August 24, 2024 and sell it today you would earn a total of 180.00 from holding Algoma Steel Group or generate 18.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insteel Industries vs. Algoma Steel Group
Performance |
| Timeline |
| Insteel Industries |
| Algoma Steel Group |
Insteel Industries and Algoma Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insteel Industries and Algoma Steel
The main advantage of trading using opposite Insteel Industries and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insteel Industries 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.| Insteel Industries vs. Haynes International | Insteel Industries vs. Mayville Engineering Co | Insteel Industries vs. Gulf Island Fabrication | Insteel Industries vs. ESAB Corp |
| Algoma Steel vs. Friedman Industries | Algoma Steel vs. Aperam PK | Algoma Steel vs. Acerinox SA ADR | Algoma Steel vs. Algoma Steel Group |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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