Correlation Between Arm Holdings and ArcelorMittal
Can any of the company-specific risk be diversified away by investing in both Arm Holdings and ArcelorMittal 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 Arm Holdings and ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arm Holdings plc and ArcelorMittal SA ADR, you can compare the effects of market volatilities on Arm Holdings and ArcelorMittal 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 Arm Holdings with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arm Holdings and ArcelorMittal.
Diversification Opportunities for Arm Holdings and ArcelorMittal
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Arm and ArcelorMittal is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Arm Holdings plc and ArcelorMittal SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA ADR and Arm Holdings 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 Arm Holdings plc are associated (or correlated) with ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA ADR has no effect on the direction of Arm Holdings i.e., Arm Holdings and ArcelorMittal go up and down completely randomly.
Pair Corralation between Arm Holdings and ArcelorMittal
Considering the 90-day investment horizon Arm Holdings plc is expected to under-perform the ArcelorMittal. In addition to that, Arm Holdings is 1.15 times more volatile than ArcelorMittal SA ADR. It trades about -0.08 of its total potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about 0.09 per unit of volatility. If you would invest 2,438 in ArcelorMittal SA ADR on September 1, 2024 and sell it today you would earn a total of 90.00 from holding ArcelorMittal SA ADR or generate 3.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arm Holdings plc vs. ArcelorMittal SA ADR
Performance |
| Timeline |
| Arm Holdings plc |
| ArcelorMittal SA ADR |
Arm Holdings and ArcelorMittal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arm Holdings and ArcelorMittal
The main advantage of trading using opposite Arm Holdings and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arm Holdings position performs unexpectedly, ArcelorMittal 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 ArcelorMittal will offset losses from the drop in ArcelorMittal's long position.| Arm Holdings vs. ArcelorMittal SA ADR | Arm Holdings vs. Sanyo Special Steel | Arm Holdings vs. United States Steel | Arm Holdings vs. CECO Environmental Corp |
| ArcelorMittal vs. Olympic Steel | ArcelorMittal vs. Ternium SA ADR | ArcelorMittal vs. Gerdau SA ADR | ArcelorMittal vs. POSCO Holdings |
Check out your portfolio center.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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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