Correlation Between SCOR PK and Algoma Steel

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

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

Diversification Opportunities for SCOR PK and Algoma Steel

-0.07

Correlation Coefficient

SCOR PK  Algoma Steel

Good diversification

The 3 months correlation between SCOR and Algoma is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding SCOR PK 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 SCOR PK 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 SCOR PK 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 SCOR PK i.e., SCOR PK and Algoma Steel go up and down completely randomly.

Pair Corralation between SCOR PK and Algoma Steel

Assuming the 90 days horizon SCOR PK is expected to generate 0.65 times more return on investment than Algoma Steel. However, SCOR PK is 1.55 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 0.0 per unit of risk. If you would invest  224.00  in SCOR PK on February 28, 2024 and sell it today you would earn a total of  73.00  from holding SCOR PK or generate 32.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

SCOR PK  vs.  Algoma Steel Group

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.

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.

Pair Trading with SCOR PK and Algoma Steel

The main advantage of trading using opposite SCOR PK and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCOR PK 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 SCOR PK 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..