Correlation Between Algoma Steel and Aperam PK

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

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

Diversification Opportunities for Algoma Steel and Aperam PK

0.02

Correlation Coefficient

Algoma Steel  Aperam PK

Significant diversification

The 3 months correlation between Algoma and Aperam is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Aperam PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aperam PK and Algoma Steel 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 Algoma Steel Group are associated (or correlated) with Aperam PK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aperam PK has no effect on the direction of Algoma Steel i.e., Algoma Steel and Aperam PK go up and down completely randomly.

Pair Corralation between Algoma Steel and Aperam PK

Given the investment horizon of 90 days Algoma Steel is expected to generate 20.9 times less return on investment than Aperam PK. But when comparing it to its historical volatility, Algoma Steel Group is 1.29 times less risky than Aperam PK. It trades about 0.01 of its potential returns per unit of risk. Aperam PK is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,534  in Aperam PK on September 16, 2024 and sell it today you would earn a total of  460.00  from holding Aperam PK or generate 18.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Algoma Steel Group  vs.  Aperam PK

Algoma Steel Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Algoma Steel Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Algoma Steel is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Aperam PK

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aperam PK are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile primary indicators, Aperam PK showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Algoma Steel and Aperam PK

The main advantage of trading using opposite Algoma Steel and Aperam PK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, Aperam PK 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 Aperam PK will offset losses from the drop in Aperam PK's long position.

The idea behind Algoma Steel Group and Aperam PK 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.