Correlation Between UNITED UTILITIES and ALGOMA STEEL
Can any of the company-specific risk be diversified away by investing in both UNITED UTILITIES 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 UNITED UTILITIES and ALGOMA STEEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UNITED UTILITIES GR and ALGOMA STEEL GROUP, you can compare the effects of market volatilities on UNITED UTILITIES 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 UNITED UTILITIES with a short position of ALGOMA STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED UTILITIES and ALGOMA STEEL.
Diversification Opportunities for UNITED UTILITIES and ALGOMA STEEL
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between UNITED and ALGOMA is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR 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 UNITED UTILITIES 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 UNITED UTILITIES GR 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 UNITED UTILITIES i.e., UNITED UTILITIES and ALGOMA STEEL go up and down completely randomly.
Pair Corralation between UNITED UTILITIES and ALGOMA STEEL
Assuming the 90 days trading horizon UNITED UTILITIES is expected to generate 2.86 times less return on investment than ALGOMA STEEL. But when comparing it to its historical volatility, UNITED UTILITIES GR is 1.7 times less risky than ALGOMA STEEL. It trades about 0.04 of its potential returns per unit of risk. ALGOMA STEEL GROUP is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 545.00 in ALGOMA STEEL GROUP on September 3, 2024 and sell it today you would earn a total of 455.00 from holding ALGOMA STEEL GROUP or generate 83.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
UNITED UTILITIES GR vs. ALGOMA STEEL GROUP
Performance |
| Timeline |
| UNITED UTILITIES |
| ALGOMA STEEL GROUP |
UNITED UTILITIES and ALGOMA STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UNITED UTILITIES and ALGOMA STEEL
The main advantage of trading using opposite UNITED UTILITIES and ALGOMA STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNITED UTILITIES 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.| UNITED UTILITIES vs. ANTA SPORTS PRODUCT | UNITED UTILITIES vs. Transport International Holdings | UNITED UTILITIES vs. Sqs Software Quality | UNITED UTILITIES vs. PSI Software AG |
| ALGOMA STEEL vs. ArcelorMittal | ALGOMA STEEL vs. Steel Dynamics | ALGOMA STEEL vs. NIPPON STEEL SPADR | ALGOMA STEEL vs. POSCO Holdings |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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