Correlation Between BBVA Banco and ArcelorMittal
Can any of the company-specific risk be diversified away by investing in both BBVA Banco 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 BBVA Banco and ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBVA Banco Frances and ArcelorMittal, you can compare the effects of market volatilities on BBVA Banco 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 BBVA Banco with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBVA Banco and ArcelorMittal.
Diversification Opportunities for BBVA Banco and ArcelorMittal
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BBVA and ArcelorMittal is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding BBVA Banco Frances and ArcelorMittal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal and BBVA Banco 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 BBVA Banco Frances 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 has no effect on the direction of BBVA Banco i.e., BBVA Banco and ArcelorMittal go up and down completely randomly.
Pair Corralation between BBVA Banco and ArcelorMittal
Assuming the 90 days horizon BBVA Banco Frances is expected to generate 1.81 times more return on investment than ArcelorMittal. However, BBVA Banco is 1.81 times more volatile than ArcelorMittal. It trades about 0.27 of its potential returns per unit of risk. ArcelorMittal is currently generating about 0.17 per unit of risk. If you would invest 1,230 in BBVA Banco Frances on August 28, 2024 and sell it today you would earn a total of 320.00 from holding BBVA Banco Frances or generate 26.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BBVA Banco Frances vs. ArcelorMittal
Performance |
| Timeline |
| BBVA Banco Frances |
| ArcelorMittal |
BBVA Banco and ArcelorMittal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BBVA Banco and ArcelorMittal
The main advantage of trading using opposite BBVA Banco and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBVA Banco 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.| BBVA Banco vs. Deutsche Bank Aktiengesellschaft | BBVA Banco vs. Superior Plus Corp | BBVA Banco vs. NMI Holdings | BBVA Banco vs. Origin Agritech |
| ArcelorMittal vs. ArcelorMittal SA | ArcelorMittal vs. Nippon Steel | ArcelorMittal vs. NIPPON STEEL SPADR | ArcelorMittal vs. Reliance Steel Aluminum |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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