Correlation Between T2 Metals and Algoma Steel
Can any of the company-specific risk be diversified away by investing in both T2 Metals 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 T2 Metals and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between T2 Metals Corp and Algoma Steel Group, you can compare the effects of market volatilities on T2 Metals 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 T2 Metals with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of T2 Metals and Algoma Steel.
Diversification Opportunities for T2 Metals and Algoma Steel
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TWO and Algoma is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding T2 Metals 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 T2 Metals 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 T2 Metals Corp 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 T2 Metals i.e., T2 Metals and Algoma Steel go up and down completely randomly.
Pair Corralation between T2 Metals and Algoma Steel
Assuming the 90 days horizon T2 Metals Corp is expected to generate 3.18 times more return on investment than Algoma Steel. However, T2 Metals is 3.18 times more volatile than Algoma Steel Group. It trades about 0.07 of its potential returns per unit of risk. Algoma Steel Group is currently generating about 0.07 per unit of risk. If you would invest 14.00 in T2 Metals Corp on August 26, 2024 and sell it today you would earn a total of 14.00 from holding T2 Metals Corp or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
T2 Metals Corp vs. Algoma Steel Group
Performance |
| Timeline |
| T2 Metals Corp |
| Algoma Steel Group |
T2 Metals and Algoma Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with T2 Metals and Algoma Steel
The main advantage of trading using opposite T2 Metals and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T2 Metals 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 T2 Metals Corp 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. Algoma Steel Group | Algoma Steel vs. Champion Iron | Algoma Steel vs. Ero Copper Corp | Algoma Steel vs. West Fraser Timber |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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