Correlation Between Liberty Gold and Algoma Steel

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

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

Diversification Opportunities for Liberty Gold and Algoma Steel

-0.58

Correlation Coefficient

Liberty Gold  Algoma Steel

Excellent diversification

The 3 months correlation between Liberty and Algoma is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Gold 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 Liberty Gold 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 Liberty Gold 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 Liberty Gold i.e., Liberty Gold and Algoma Steel go up and down completely randomly.

Pair Corralation between Liberty Gold and Algoma Steel

Assuming the 90 days horizon Liberty Gold Corp is expected to under-perform the Algoma Steel. In addition to that, Liberty Gold is 1.75 times more volatile than Algoma Steel Group. It trades about -0.11 of its total potential returns per unit of risk. Algoma Steel Group is currently generating about 0.02 per unit of volatility. If you would invest  1,059  in Algoma Steel Group on August 30, 2024 and sell it today you would earn a total of  8.00  from holding Algoma Steel Group or generate 0.76% return on investment over 90 days.

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

Liberty Gold Corp  vs.  Algoma Steel Group

Liberty Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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. Despite quite persistent basic indicators, Algoma Steel is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Liberty Gold and Algoma Steel

The main advantage of trading using opposite Liberty Gold and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Gold 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 Liberty Gold 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.