Correlation Between Aperam PK and Algoma Steel

Can any of the company-specific risk be diversified away by investing in both Aperam PK 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 Aperam PK and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aperam PK and Algoma Steel Group, you can compare the effects of market volatilities on Aperam PK 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 Aperam PK with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aperam PK and Algoma Steel.

Diversification Opportunities for Aperam PK and Algoma Steel

0.08

Correlation Coefficient

Aperam PK  Algoma Steel

Significant diversification

The 3 months correlation between Aperam and Algoma is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Aperam PK 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 Aperam PK 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 Aperam PK 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 Aperam PK i.e., Aperam PK and Algoma Steel go up and down completely randomly.

Pair Corralation between Aperam PK and Algoma Steel

Assuming the 90 days horizon Aperam PK is expected to generate 7.07 times less return on investment than Algoma Steel. In addition to that, Aperam PK is 1.42 times more volatile than Algoma Steel Group. It trades about 0.0 of its total potential returns per unit of risk. Algoma Steel Group is currently generating about 0.04 per unit of volatility. If you would invest  1,006  in Algoma Steel Group on September 3, 2024 and sell it today you would earn a total of  50.00  from holding Algoma Steel Group or generate 4.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Aperam PK  vs.  Algoma Steel Group

Aperam PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aperam PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Aperam PK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Algoma Steel Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Algoma Steel Group are ranked lower than 3 (%) 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.

Pair Trading with Aperam PK and Algoma Steel

The main advantage of trading using opposite Aperam PK and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aperam PK 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 Aperam PK 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.