Correlation Between Osaka Steel and Algoma Steel

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Can any of the company-specific risk be diversified away by investing in both Osaka Steel 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 Osaka Steel and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Osaka Steel Co, and Algoma Steel Group, you can compare the effects of market volatilities on Osaka Steel 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 Osaka Steel with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Osaka Steel and Algoma Steel.

Diversification Opportunities for Osaka Steel and Algoma Steel

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between Osaka and Algoma is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Osaka Steel Co, 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 Osaka Steel 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 Osaka Steel Co, 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 Osaka Steel i.e., Osaka Steel and Algoma Steel go up and down completely randomly.

Pair Corralation between Osaka Steel and Algoma Steel

Assuming the 90 days horizon Osaka Steel is expected to generate 41.18 times less return on investment than Algoma Steel. But when comparing it to its historical volatility, Osaka Steel Co, is 44.68 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 0.06 of returns per unit of risk over similar time horizon. If you would invest  585.00  in Algoma Steel Group on September 12, 2024 and sell it today you would earn a total of  427.00  from holding Algoma Steel Group or generate 72.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

Osaka Steel Co,  vs.  Algoma Steel Group

 Performance 
       Timeline  
Osaka Steel Co, 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Osaka Steel Co, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Osaka Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Algoma Steel Group 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Algoma Steel Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Algoma Steel is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Osaka Steel and Algoma Steel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Osaka Steel and Algoma Steel

The main advantage of trading using opposite Osaka Steel and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Osaka Steel 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 Osaka Steel Co, 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.
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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