Correlation Between MTY Food and Algoma Steel
Can any of the company-specific risk be diversified away by investing in both MTY Food 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 MTY Food and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MTY Food Group and Algoma Steel Group, you can compare the effects of market volatilities on MTY Food 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 MTY Food with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTY Food and Algoma Steel.
Diversification Opportunities for MTY Food and Algoma Steel
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MTY and Algoma is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding MTY Food 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 MTY Food 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 MTY Food 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 MTY Food i.e., MTY Food and Algoma Steel go up and down completely randomly.
Pair Corralation between MTY Food and Algoma Steel
Assuming the 90 days trading horizon MTY Food Group is expected to generate 0.69 times more return on investment than Algoma Steel. However, MTY Food Group is 1.44 times less risky than Algoma Steel. It trades about 0.16 of its potential returns per unit of risk. Algoma Steel Group is currently generating about -0.03 per unit of risk. If you would invest 4,188 in MTY Food Group on November 2, 2024 and sell it today you would earn a total of 1,088 from holding MTY Food Group or generate 25.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MTY Food Group vs. Algoma Steel Group
Performance |
| Timeline |
| MTY Food Group |
| Algoma Steel Group |
MTY Food and Algoma Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MTY Food and Algoma Steel
The main advantage of trading using opposite MTY Food and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTY Food 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.| MTY Food vs. Restaurant Brands International | MTY Food vs. Enghouse Systems | MTY Food vs. Metro Inc | MTY Food vs. BRP Inc |
| 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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