Correlation Between Champion Iron and Algoma Steel

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

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

Diversification Opportunities for Champion Iron and Algoma Steel

-0.25

Correlation Coefficient

Champion Iron  Algoma Steel

Very good diversification

The 3 months correlation between Champion and Algoma is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron Limited 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 Champion Iron 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 Champion Iron Limited 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 Champion Iron i.e., Champion Iron and Algoma Steel go up and down completely randomly.

Pair Corralation between Champion Iron and Algoma Steel

Assuming the 90 days horizon Champion Iron Limited is expected to under-perform the Algoma Steel. But the otc stock apears to be less risky and, when comparing its historical volatility, Champion Iron Limited is 1.35 times less risky than Algoma Steel. The otc stock trades about -0.01 of its potential returns per unit of risk. The Algoma Steel Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  105.00  in Algoma Steel Group on September 14, 2024 and sell it today you would earn a total of  49.00  from holding Algoma Steel Group or generate 46.67% return on investment over 90 days.

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

Champion Iron Limited  vs.  Algoma Steel Group

Champion Iron Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Champion Iron Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Champion Iron reported solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of latest conflicting performance, the Stock's essential indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Champion Iron and Algoma Steel

The main advantage of trading using opposite Champion Iron and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron 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 Champion Iron Limited 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 Transaction History module to view history of all your transactions and understand their impact on performance.