Correlation Between Hampton Financial and Algoma Steel

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

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

Diversification Opportunities for Hampton Financial and Algoma Steel

-0.49

Correlation Coefficient

Hampton Financial  Algoma Steel

Very good diversification

The 3 months correlation between Hampton and Algoma is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Hampton Financial Corp 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 Hampton Financial 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 Hampton Financial Corp 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 Hampton Financial i.e., Hampton Financial and Algoma Steel go up and down completely randomly.

Pair Corralation between Hampton Financial and Algoma Steel

Assuming the 90 days horizon Hampton Financial Corp is expected to generate 0.9 times more return on investment than Algoma Steel. However, Hampton Financial Corp is 1.11 times less risky than Algoma Steel. It trades about 0.03 of its potential returns per unit of risk. Algoma Steel Group is currently generating about 0.02 per unit of risk. If you would invest  44.00  in Hampton Financial Corp on September 26, 2024 and sell it today you would earn a total of  1.00  from holding Hampton Financial Corp or generate 2.27% return on investment over 90 days.

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

Hampton Financial Corp  vs.  Algoma Steel Group

Hampton Financial Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hampton Financial Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hampton Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Algoma Steel Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Algoma Steel Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Algoma Steel is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hampton Financial and Algoma Steel

The main advantage of trading using opposite Hampton Financial and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hampton Financial 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 Hampton Financial Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..