Correlation Between Universal Stainless and Algoma Steel
Can any of the company-specific risk be diversified away by investing in both Universal Stainless 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 Universal Stainless and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Stainless Alloy and Algoma Steel Group, you can compare the effects of market volatilities on Universal Stainless 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 Universal Stainless with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Stainless and Algoma Steel.
Diversification Opportunities for Universal Stainless and Algoma Steel
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Universal and Algoma is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Universal Stainless Alloy 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 Universal Stainless 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 Universal Stainless Alloy 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 Universal Stainless i.e., Universal Stainless and Algoma Steel go up and down completely randomly.
Pair Corralation between Universal Stainless and Algoma Steel
Given the investment horizon of 90 days Universal Stainless is expected to generate 3.49 times less return on investment than Algoma Steel. But when comparing it to its historical volatility, Universal Stainless Alloy is 7.19 times less risky than Algoma Steel. It trades about 0.19 of its potential returns per unit of risk. Algoma Steel Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,055 in Algoma Steel Group on August 28, 2024 and sell it today you would earn a total of 52.00 from holding Algoma Steel Group or generate 4.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Stainless Alloy vs. Algoma Steel Group
Performance |
| Timeline |
| Universal Stainless Alloy |
| Algoma Steel Group |
Universal Stainless and Algoma Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Stainless and Algoma Steel
The main advantage of trading using opposite Universal Stainless and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Stainless 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.| Universal Stainless vs. Olympic Steel | Universal Stainless vs. Outokumpu Oyj ADR | Universal Stainless vs. Usinas Siderurgicas de | Universal Stainless vs. POSCO Holdings |
| Algoma Steel vs. Labrador Gold Corp | Algoma Steel vs. Aurion Resources | Algoma Steel vs. Puma Exploration | Algoma Steel vs. Golden Star Resource |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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