Correlation Between Olin and Algoma Steel
Can any of the company-specific risk be diversified away by investing in both Olin 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 Olin and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Olin Corporation and Algoma Steel Group, you can compare the effects of market volatilities on Olin 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 Olin with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olin and Algoma Steel.
Diversification Opportunities for Olin and Algoma Steel
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Olin and Algoma is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Olin Corp. 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 Olin 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 Olin Corporation 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 Olin i.e., Olin and Algoma Steel go up and down completely randomly.
Pair Corralation between Olin and Algoma Steel
Considering the 90-day investment horizon Olin is expected to generate 1.07 times less return on investment than Algoma Steel. But when comparing it to its historical volatility, Olin Corporation is 1.52 times less risky than Algoma Steel. It trades about 0.13 of its potential returns per unit of risk. Algoma Steel Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,055 in Algoma Steel Group on August 27, 2024 and sell it today you would earn a total of 52.00 from holding Algoma Steel Group or generate 4.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Olin Corp. vs. Algoma Steel Group
Performance |
| Timeline |
| Olin |
| Algoma Steel Group |
Olin and Algoma Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Olin and Algoma Steel
The main advantage of trading using opposite Olin and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olin 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.The idea behind Olin Corporation and Algoma Steel Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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