Correlation Between Major Drilling and Algoma Steel
Can any of the company-specific risk be diversified away by investing in both Major Drilling 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 Major Drilling and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Major Drilling Group and Algoma Steel Group, you can compare the effects of market volatilities on Major Drilling 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 Major Drilling with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and Algoma Steel.
Diversification Opportunities for Major Drilling and Algoma Steel
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Major and Algoma is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group 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 Major Drilling 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 Major Drilling Group 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 Major Drilling i.e., Major Drilling and Algoma Steel go up and down completely randomly.
Pair Corralation between Major Drilling and Algoma Steel
Assuming the 90 days trading horizon Major Drilling Group is expected to under-perform the Algoma Steel. But the stock apears to be less risky and, when comparing its historical volatility, Major Drilling Group is 1.13 times less risky than Algoma Steel. The stock trades about -0.01 of its potential returns per unit of risk. The Algoma Steel Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 565.00 in Algoma Steel Group on September 4, 2024 and sell it today you would earn a total of 491.00 from holding Algoma Steel Group or generate 86.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Major Drilling Group vs. Algoma Steel Group
Performance |
| Timeline |
| Major Drilling Group |
| Algoma Steel Group |
Major Drilling and Algoma Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Major Drilling and Algoma Steel
The main advantage of trading using opposite Major Drilling and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling 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.| Major Drilling vs. Pason Systems | Major Drilling vs. HudBay Minerals | Major Drilling vs. Ensign Energy Services | Major Drilling vs. Precision Drilling |
| 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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