Correlation Between United States and Algoma Steel
Can any of the company-specific risk be diversified away by investing in both United States 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 States 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 States Steel and Algoma Steel Group, you can compare the effects of market volatilities on United States 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 States with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Algoma Steel.
Diversification Opportunities for United States and Algoma Steel
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between United and Algoma is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 States 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 States Steel 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 States i.e., United States and Algoma Steel go up and down completely randomly.
Pair Corralation between United States and Algoma Steel
Taking into account the 90-day investment horizon United States is expected to generate 3.39 times less return on investment than Algoma Steel. In addition to that, United States is 1.2 times more volatile than Algoma Steel Group. It trades about 0.02 of its total potential returns per unit of risk. Algoma Steel Group is currently generating about 0.09 per unit of volatility. If you would invest 1,055 in Algoma Steel Group on August 27, 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Algoma Steel Group
Performance |
| Timeline |
| United States Steel |
| Algoma Steel Group |
United States and Algoma Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Algoma Steel
The main advantage of trading using opposite United States and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 States vs. Nucor Corp | United States vs. Steel Dynamics | United States vs. ArcelorMittal SA ADR | United States vs. Gerdau SA ADR |
| 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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