Correlation Between China Hongqiao and ArcelorMittal
Can any of the company-specific risk be diversified away by investing in both China Hongqiao 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 China Hongqiao and ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Hongqiao Group and ArcelorMittal SA ADR, you can compare the effects of market volatilities on China Hongqiao 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 China Hongqiao with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Hongqiao and ArcelorMittal.
Diversification Opportunities for China Hongqiao and ArcelorMittal
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and ArcelorMittal is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding China Hongqiao Group and ArcelorMittal SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA ADR and China Hongqiao 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 China Hongqiao Group 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 ADR has no effect on the direction of China Hongqiao i.e., China Hongqiao and ArcelorMittal go up and down completely randomly.
Pair Corralation between China Hongqiao and ArcelorMittal
Assuming the 90 days horizon China Hongqiao Group is expected to generate 2.41 times more return on investment than ArcelorMittal. However, China Hongqiao is 2.41 times more volatile than ArcelorMittal SA ADR. It trades about 0.09 of its potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about 0.01 per unit of risk. If you would invest 36.00 in China Hongqiao Group on September 5, 2024 and sell it today you would earn a total of 130.00 from holding China Hongqiao Group or generate 361.11% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 99.8% |
Values | Daily Returns |
China Hongqiao Group vs. ArcelorMittal SA ADR
Performance |
Timeline |
China Hongqiao Group |
ArcelorMittal SA ADR |
China Hongqiao and ArcelorMittal Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Hongqiao and ArcelorMittal
The main advantage of trading using opposite China Hongqiao and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Hongqiao 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.China Hongqiao vs. Kaiser Aluminum | China Hongqiao vs. Century Aluminum | China Hongqiao vs. Constellium Nv | China Hongqiao vs. Alcoa Corp |
ArcelorMittal vs. Constellium Nv | ArcelorMittal vs. Century Aluminum | ArcelorMittal vs. China Hongqiao Group | ArcelorMittal vs. Kaiser 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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