Correlation Between Algoma Steel and SCOR PK

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

Diversification Opportunities for Algoma Steel and SCOR PK

-0.07

Correlation Coefficient

Algoma Steel  SCOR PK

Good diversification

The 3 months correlation between Algoma and SCOR is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and SCOR PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOR PK 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 SCOR PK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOR PK has no effect on the direction of Algoma Steel i.e., Algoma Steel and SCOR PK go up and down completely randomly.

Pair Corralation between Algoma Steel and SCOR PK

Assuming the 90 days horizon Algoma Steel Group is expected to generate 1.43 times more return on investment than SCOR PK. However, Algoma Steel is 1.43 times more volatile than SCOR PK. It trades about 0.07 of its potential returns per unit of risk. SCOR PK is currently generating about -0.06 per unit of risk. If you would invest  114.00  in Algoma Steel Group on February 28, 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	Insignificant
Accuracy	95.45%
Values	Daily Returns

Algoma Steel Group  vs.  SCOR PK

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 fairly stable essential indicators, Algoma Steel is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SCOR PK

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SCOR PK are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, SCOR PK may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Algoma Steel and SCOR PK

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

The idea behind Algoma Steel Group and SCOR PK 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.