Correlation Between APPLE HOSPITALITY and ALGOMA STEEL

Can any of the company-specific risk be diversified away by investing in both APPLE HOSPITALITY 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 APPLE HOSPITALITY and ALGOMA STEEL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between APPLE HOSPITALITY REIT and ALGOMA STEEL GROUP, you can compare the effects of market volatilities on APPLE HOSPITALITY 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 APPLE HOSPITALITY with a short position of ALGOMA STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLE HOSPITALITY and ALGOMA STEEL.

Diversification Opportunities for APPLE HOSPITALITY and ALGOMA STEEL

0.72

Correlation Coefficient

APPLE HOSPITALITY  ALGOMA STEEL

Poor diversification

The 3 months correlation between APPLE and ALGOMA is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding APPLE HOSPITALITY REIT 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 APPLE HOSPITALITY 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 APPLE HOSPITALITY REIT 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 APPLE HOSPITALITY i.e., APPLE HOSPITALITY and ALGOMA STEEL go up and down completely randomly.

Pair Corralation between APPLE HOSPITALITY and ALGOMA STEEL

Assuming the 90 days horizon APPLE HOSPITALITY REIT is expected to generate 0.8 times more return on investment than ALGOMA STEEL. However, APPLE HOSPITALITY REIT is 1.26 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 0.07 per unit of risk. If you would invest  1,244  in APPLE HOSPITALITY REIT on September 13, 2024 and sell it today you would earn a total of  287.00  from holding APPLE HOSPITALITY REIT or generate 23.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

APPLE HOSPITALITY REIT  vs.  ALGOMA STEEL GROUP

APPLE HOSPITALITY REIT

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in APPLE HOSPITALITY REIT are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, APPLE HOSPITALITY reported solid returns over the last few months and may actually be approaching a breakup point.

ALGOMA STEEL GROUP

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ALGOMA STEEL GROUP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ALGOMA STEEL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with APPLE HOSPITALITY and ALGOMA STEEL

The main advantage of trading using opposite APPLE HOSPITALITY and ALGOMA STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLE HOSPITALITY 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 APPLE HOSPITALITY REIT 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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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.