Correlation Between ArcelorMittal and Iron Road
Can any of the company-specific risk be diversified away by investing in both ArcelorMittal and Iron Road 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 Iron Road into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ArcelorMittal SA and Iron Road Limited, you can compare the effects of market volatilities on ArcelorMittal and Iron Road 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 Iron Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcelorMittal and Iron Road.
Diversification Opportunities for ArcelorMittal and Iron Road
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between ArcelorMittal and Iron is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA and Iron Road Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Road 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 Iron Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron Road Limited has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Iron Road go up and down completely randomly.
Pair Corralation between ArcelorMittal and Iron Road
Assuming the 90 days trading horizon ArcelorMittal SA is expected to generate 0.53 times more return on investment than Iron Road. However, ArcelorMittal SA is 1.87 times less risky than Iron Road. It trades about -0.16 of its potential returns per unit of risk. Iron Road Limited is currently generating about -0.12 per unit of risk. If you would invest 2,373 in ArcelorMittal SA on September 25, 2024 and sell it today you would lose (161.00) from holding ArcelorMittal SA or give up 6.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
ArcelorMittal SA vs. Iron Road Limited
Performance |
| Timeline |
| ArcelorMittal SA |
| Iron Road Limited |
ArcelorMittal and Iron Road Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ArcelorMittal and Iron Road
The main advantage of trading using opposite ArcelorMittal and Iron Road positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ArcelorMittal position performs unexpectedly, Iron Road 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 Iron Road will offset losses from the drop in Iron Road's long position.| ArcelorMittal vs. Nucor | ArcelorMittal vs. ArcelorMittal | ArcelorMittal vs. Steel Dynamics | ArcelorMittal vs. Nippon Steel |
| Iron Road vs. Nucor | Iron Road vs. ArcelorMittal SA | Iron Road vs. ArcelorMittal | Iron Road vs. Steel Dynamics |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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