Correlation Between Seabridge Gold and Algoma Steel

Can any of the company-specific risk be diversified away by investing in both Seabridge 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 Seabridge 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 Seabridge Gold and Algoma Steel Group, you can compare the effects of market volatilities on Seabridge 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 Seabridge Gold with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seabridge Gold and Algoma Steel.

Diversification Opportunities for Seabridge Gold and Algoma Steel

-0.6

Correlation Coefficient

Seabridge Gold  Algoma Steel

Excellent diversification

The 3 months correlation between Seabridge and Algoma is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Seabridge Gold 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 Seabridge 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 Seabridge Gold 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 Seabridge Gold i.e., Seabridge Gold and Algoma Steel go up and down completely randomly.

Pair Corralation between Seabridge Gold and Algoma Steel

Allowing for the 90-day total investment horizon Seabridge Gold is expected to under-perform the Algoma Steel. In addition to that, Seabridge Gold is 1.24 times more volatile than Algoma Steel Group. It trades about -0.1 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	Weak
Accuracy	98.44%
Values	Daily Returns

Seabridge Gold  vs.  Algoma Steel Group

Seabridge Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seabridge Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company 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. 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 Seabridge Gold and Algoma Steel

The main advantage of trading using opposite Seabridge Gold and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seabridge 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 Seabridge Gold 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.