Correlation Between Goeasy and Algoma Central

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

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

Diversification Opportunities for Goeasy and Algoma Central

0.12

Correlation Coefficient

Goeasy  Algoma Central

Average diversification

The 3 months correlation between Goeasy and Algoma is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding goeasy and Algoma Central in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algoma Central and Goeasy 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 goeasy are associated (or correlated) with Algoma Central. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algoma Central has no effect on the direction of Goeasy i.e., Goeasy and Algoma Central go up and down completely randomly.

Pair Corralation between Goeasy and Algoma Central

Assuming the 90 days trading horizon goeasy is expected to generate 1.44 times more return on investment than Algoma Central. However, Goeasy is 1.44 times more volatile than Algoma Central. It trades about -0.17 of its potential returns per unit of risk. Algoma Central is currently generating about -0.29 per unit of risk. If you would invest  17,367  in goeasy on September 25, 2024 and sell it today you would lose (790.00) from holding goeasy or give up 4.55% of portfolio value over 90 days.

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

goeasy  vs.  Algoma Central

goeasy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days goeasy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Goeasy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Algoma Central

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Algoma Central has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Algoma Central is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Goeasy and Algoma Central

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

The idea behind goeasy and Algoma Central 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.