Correlation Between Reservoir Media and Algoma Steel
Can any of the company-specific risk be diversified away by investing in both Reservoir Media 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 Reservoir Media and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reservoir Media and Algoma Steel Group, you can compare the effects of market volatilities on Reservoir Media 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 Reservoir Media with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reservoir Media and Algoma Steel.
Diversification Opportunities for Reservoir Media and Algoma Steel
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Reservoir and Algoma is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Reservoir Media 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 Reservoir Media 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 Reservoir Media 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 Reservoir Media i.e., Reservoir Media and Algoma Steel go up and down completely randomly.
Pair Corralation between Reservoir Media and Algoma Steel
Given the investment horizon of 90 days Reservoir Media is expected to generate 0.76 times more return on investment than Algoma Steel. However, Reservoir Media is 1.31 times less risky than Algoma Steel. It trades about 0.15 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 866.00 in Reservoir Media on August 31, 2024 and sell it today you would earn a total of 61.00 from holding Reservoir Media or generate 7.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reservoir Media vs. Algoma Steel Group
Performance |
| Timeline |
| Reservoir Media |
| Algoma Steel Group |
Reservoir Media and Algoma Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reservoir Media and Algoma Steel
The main advantage of trading using opposite Reservoir Media and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reservoir Media 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.| Reservoir Media vs. Roku Inc | Reservoir Media vs. AMC Entertainment Holdings | Reservoir Media vs. Paramount Global Class | Reservoir Media vs. Warner Bros Discovery |
| Algoma Steel vs. Nucor Corp | Algoma Steel vs. Steel Dynamics | Algoma Steel vs. ArcelorMittal SA ADR | Algoma Steel vs. Gerdau 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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