Correlation Between Alibaba Group and ArcelorMittal
Can any of the company-specific risk be diversified away by investing in both Alibaba Group 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 Alibaba Group and ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alibaba Group Holding and ArcelorMittal SA, you can compare the effects of market volatilities on Alibaba Group 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 Alibaba Group with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and ArcelorMittal.
Diversification Opportunities for Alibaba Group and ArcelorMittal
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Alibaba and ArcelorMittal is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA and Alibaba Group 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 Alibaba Group Holding 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 has no effect on the direction of Alibaba Group i.e., Alibaba Group and ArcelorMittal go up and down completely randomly.
Pair Corralation between Alibaba Group and ArcelorMittal
Assuming the 90 days trading horizon Alibaba Group Holding is expected to under-perform the ArcelorMittal. In addition to that, Alibaba Group is 1.14 times more volatile than ArcelorMittal SA. It trades about -0.18 of its total potential returns per unit of risk. ArcelorMittal SA is currently generating about 0.04 per unit of volatility. If you would invest 7,083 in ArcelorMittal SA on August 30, 2024 and sell it today you would earn a total of 97.00 from holding ArcelorMittal SA or generate 1.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alibaba Group Holding vs. ArcelorMittal SA
Performance |
| Timeline |
| Alibaba Group Holding |
| ArcelorMittal SA |
Alibaba Group and ArcelorMittal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alibaba Group and ArcelorMittal
The main advantage of trading using opposite Alibaba Group and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group 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.| Alibaba Group vs. Take Two Interactive Software | Alibaba Group vs. Fidelity National Information | Alibaba Group vs. Micron Technology | Alibaba Group vs. G2D Investments |
| ArcelorMittal vs. Metalurgica Gerdau SA | ArcelorMittal vs. HDFC Bank Limited | ArcelorMittal vs. The Home Depot | ArcelorMittal vs. Waste Management |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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