Correlation Between Algoma Steel and Resolute Mining

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

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

Diversification Opportunities for Algoma Steel and Resolute Mining

-0.53

Correlation Coefficient

Algoma Steel  Resolute Mining

Excellent diversification

The 3 months correlation between Algoma and Resolute is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and Resolute Mining Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resolute Mining and Algoma Steel 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 Algoma Steel Group are associated (or correlated) with Resolute Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resolute Mining has no effect on the direction of Algoma Steel i.e., Algoma Steel and Resolute Mining go up and down completely randomly.

Pair Corralation between Algoma Steel and Resolute Mining

If you would invest  114.00  in Algoma Steel Group on February 27, 2024 and sell it today you would earn a total of  5.00  from holding Algoma Steel Group or generate 4.39% return on investment over 90 days.

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

Algoma Steel Group  vs.  Resolute Mining Ltd

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 uncertain 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.

Resolute Mining

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Resolute Mining Ltd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Resolute Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Algoma Steel and Resolute Mining

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

The idea behind Algoma Steel Group and Resolute Mining Ltd 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.