Correlation Between ArcelorMittal and Schlumberger

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Can any of the company-specific risk be diversified away by investing in both ArcelorMittal and Schlumberger 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 ArcelorMittal and Schlumberger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ArcelorMittal SA and Schlumberger Limited, you can compare the effects of market volatilities on ArcelorMittal and Schlumberger 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 ArcelorMittal with a short position of Schlumberger. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcelorMittal and Schlumberger.

Diversification Opportunities for ArcelorMittal and Schlumberger

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between ArcelorMittal and Schlumberger is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA and Schlumberger Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger Limited and ArcelorMittal 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 ArcelorMittal SA are associated (or correlated) with Schlumberger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schlumberger Limited has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Schlumberger go up and down completely randomly.

Pair Corralation between ArcelorMittal and Schlumberger

Assuming the 90 days trading horizon ArcelorMittal SA is expected to generate 1.03 times more return on investment than Schlumberger. However, ArcelorMittal is 1.03 times more volatile than Schlumberger Limited. It trades about 0.14 of its potential returns per unit of risk. Schlumberger Limited is currently generating about 0.11 per unit of risk. If you would invest  6,208  in ArcelorMittal SA on September 5, 2024 and sell it today you would earn a total of  1,234  from holding ArcelorMittal SA or generate 19.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.41%
ValuesDaily Returns

ArcelorMittal SA  vs.  Schlumberger Limited

 Performance 
       Timeline  
ArcelorMittal SA 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, ArcelorMittal sustained solid returns over the last few months and may actually be approaching a breakup point.
Schlumberger Limited 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Schlumberger Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Schlumberger sustained solid returns over the last few months and may actually be approaching a breakup point.

ArcelorMittal and Schlumberger Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ArcelorMittal and Schlumberger

The main advantage of trading using opposite ArcelorMittal and Schlumberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ArcelorMittal position performs unexpectedly, Schlumberger 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 Schlumberger will offset losses from the drop in Schlumberger's long position.
The idea behind ArcelorMittal SA and Schlumberger Limited 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.
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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