Correlation Between ArcelorMittal and Reliance Steel
Can any of the company-specific risk be diversified away by investing in both ArcelorMittal and Reliance 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 ArcelorMittal and Reliance Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ArcelorMittal and Reliance Steel Aluminum, you can compare the effects of market volatilities on ArcelorMittal and Reliance 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 ArcelorMittal with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcelorMittal and Reliance Steel.
Diversification Opportunities for ArcelorMittal and Reliance Steel
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ArcelorMittal and Reliance is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal and Reliance Steel Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Steel Aluminum 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 are associated (or correlated) with Reliance Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Steel Aluminum has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Reliance Steel go up and down completely randomly.
Pair Corralation between ArcelorMittal and Reliance Steel
Assuming the 90 days trading horizon ArcelorMittal is expected to generate 1.15 times more return on investment than Reliance Steel. However, ArcelorMittal is 1.15 times more volatile than Reliance Steel Aluminum. It trades about 0.1 of its potential returns per unit of risk. Reliance Steel Aluminum is currently generating about 0.05 per unit of risk. If you would invest 1,901 in ArcelorMittal on November 3, 2024 and sell it today you would earn a total of 479.00 from holding ArcelorMittal or generate 25.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ArcelorMittal vs. Reliance Steel Aluminum
Performance |
| Timeline |
| ArcelorMittal |
| Reliance Steel Aluminum |
ArcelorMittal and Reliance Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ArcelorMittal and Reliance Steel
The main advantage of trading using opposite ArcelorMittal and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ArcelorMittal position performs unexpectedly, Reliance 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 Reliance Steel will offset losses from the drop in Reliance Steel's long position.| ArcelorMittal vs. CITIC Telecom International | ArcelorMittal vs. MOLSON RS BEVERAGE | ArcelorMittal vs. United Natural Foods | ArcelorMittal vs. Citic Telecom International |
| Reliance Steel vs. APPLIED MATERIALS | Reliance Steel vs. THRACE PLASTICS | Reliance Steel vs. SANOK RUBBER ZY | Reliance Steel vs. Materialise NV |
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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