Correlation Between Leons Furniture and Algoma Steel
Can any of the company-specific risk be diversified away by investing in both Leons Furniture 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 Leons Furniture and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leons Furniture Limited and Algoma Steel Group, you can compare the effects of market volatilities on Leons Furniture 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 Leons Furniture with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and Algoma Steel.
Diversification Opportunities for Leons Furniture and Algoma Steel
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Leons and Algoma is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture 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 Leons Furniture 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 Leons Furniture 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 Leons Furniture i.e., Leons Furniture and Algoma Steel go up and down completely randomly.
Pair Corralation between Leons Furniture and Algoma Steel
Assuming the 90 days trading horizon Leons Furniture Limited is expected to generate 0.9 times more return on investment than Algoma Steel. However, Leons Furniture Limited is 1.11 times less risky than Algoma Steel. It trades about 0.06 of its potential returns per unit of risk. Algoma Steel Group is currently generating about 0.02 per unit of risk. If you would invest 1,606 in Leons Furniture Limited on November 27, 2024 and sell it today you would earn a total of 944.00 from holding Leons Furniture Limited or generate 58.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leons Furniture Limited vs. Algoma Steel Group
Performance |
| Timeline |
| Leons Furniture |
| Algoma Steel Group |
Leons Furniture and Algoma Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leons Furniture and Algoma Steel
The main advantage of trading using opposite Leons Furniture and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture 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.| Leons Furniture vs. High Liner Foods | Leons Furniture vs. Richelieu Hardware | Leons Furniture vs. North West | Leons Furniture vs. Toromont Industries |
| Algoma Steel vs. Algoma Steel Group | Algoma Steel vs. Champion Iron | Algoma Steel vs. Ero Copper Corp | Algoma Steel vs. West Fraser Timber |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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