Correlation Between Outokumpu Oyj and Algoma Steel
Can any of the company-specific risk be diversified away by investing in both Outokumpu Oyj 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 Outokumpu Oyj and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Outokumpu Oyj ADR and Algoma Steel Group, you can compare the effects of market volatilities on Outokumpu Oyj 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 Outokumpu Oyj with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Outokumpu Oyj and Algoma Steel.
Diversification Opportunities for Outokumpu Oyj and Algoma Steel
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Outokumpu and Algoma is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Outokumpu Oyj ADR 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 Outokumpu Oyj 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 Outokumpu Oyj ADR 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 Outokumpu Oyj i.e., Outokumpu Oyj and Algoma Steel go up and down completely randomly.
Pair Corralation between Outokumpu Oyj and Algoma Steel
Assuming the 90 days horizon Outokumpu Oyj ADR is expected to under-perform the Algoma Steel. But the pink sheet apears to be less risky and, when comparing its historical volatility, Outokumpu Oyj ADR is 1.18 times less risky than Algoma Steel. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Algoma Steel Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 913.00 in Algoma Steel Group on November 9, 2024 and sell it today you would lose (55.00) from holding Algoma Steel Group or give up 6.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 96.25% |
| Values | Daily Returns |
Outokumpu Oyj ADR vs. Algoma Steel Group
Performance |
| Timeline |
| Outokumpu Oyj ADR |
| Algoma Steel Group |
Outokumpu Oyj and Algoma Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Outokumpu Oyj and Algoma Steel
The main advantage of trading using opposite Outokumpu Oyj and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Outokumpu Oyj 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.| Outokumpu Oyj vs. Companhia Siderurgica Nacional | Outokumpu Oyj vs. Olympic Steel | Outokumpu Oyj vs. Usinas Siderurgicas de | Outokumpu Oyj vs. POSCO Holdings |
| Algoma Steel vs. Friedman Industries | Algoma Steel vs. ArcelorMittal SA | Algoma Steel vs. Aperam PK | Algoma Steel vs. Acerinox SA ADR |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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