Correlation Between NiSource and Algoma Steel
Can any of the company-specific risk be diversified away by investing in both NiSource 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 NiSource and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NiSource and Algoma Steel Group, you can compare the effects of market volatilities on NiSource 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 NiSource with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of NiSource and Algoma Steel.
Diversification Opportunities for NiSource and Algoma Steel
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NiSource and Algoma is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding NiSource 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 NiSource 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 NiSource 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 NiSource i.e., NiSource and Algoma Steel go up and down completely randomly.
Pair Corralation between NiSource and Algoma Steel
Allowing for the 90-day total investment horizon NiSource is expected to generate 0.42 times more return on investment than Algoma Steel. However, NiSource is 2.4 times less risky than Algoma Steel. It trades about 0.18 of its potential returns per unit of risk. Algoma Steel Group is currently generating about 0.04 per unit of risk. If you would invest 2,562 in NiSource on August 25, 2024 and sell it today you would earn a total of 1,209 from holding NiSource or generate 47.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NiSource vs. Algoma Steel Group
Performance |
| Timeline |
| NiSource |
| Algoma Steel Group |
NiSource and Algoma Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NiSource and Algoma Steel
The main advantage of trading using opposite NiSource and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NiSource 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.| NiSource vs. NewJersey Resources | NiSource vs. Northwest Natural Gas | NiSource vs. UGI Corporation | NiSource vs. Spire Inc |
| Algoma Steel vs. Labrador Gold Corp | Algoma Steel vs. Aurion Resources | Algoma Steel vs. Puma Exploration | Algoma Steel vs. Golden Star Resource |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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