Correlation Between CONSOLIDATED and Algoma Steel

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

Diversification Opportunities for CONSOLIDATED and Algoma Steel

-0.16
  Correlation Coefficient

Good diversification

The 3 months correlation between CONSOLIDATED and Algoma is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding CONSOLIDATED EDISON N 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 CONSOLIDATED 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 CONSOLIDATED EDISON N 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 CONSOLIDATED i.e., CONSOLIDATED and Algoma Steel go up and down completely randomly.

Pair Corralation between CONSOLIDATED and Algoma Steel

Assuming the 90 days trading horizon CONSOLIDATED EDISON N is expected to under-perform the Algoma Steel. But the bond apears to be less risky and, when comparing its historical volatility, CONSOLIDATED EDISON N is 1.73 times less risky than Algoma Steel. The bond trades about -0.16 of its potential returns per unit of risk. The Algoma Steel Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,006  in Algoma Steel Group on September 3, 2024 and sell it today you would earn a total of  71.00  from holding Algoma Steel Group or generate 7.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy46.88%
ValuesDaily Returns

CONSOLIDATED EDISON N  vs.  Algoma Steel Group

 Performance 
       Timeline  
CONSOLIDATED EDISON 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CONSOLIDATED EDISON N has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for CONSOLIDATED EDISON N investors.
Algoma Steel Group 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Algoma Steel Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Algoma Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CONSOLIDATED and Algoma Steel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CONSOLIDATED and Algoma Steel

The main advantage of trading using opposite CONSOLIDATED and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CONSOLIDATED 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.
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The idea behind CONSOLIDATED EDISON N 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.
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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