Correlation Between Commercial Metals and ArcelorMittal
Can any of the company-specific risk be diversified away by investing in both Commercial Metals 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 Commercial Metals and ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commercial Metals and ArcelorMittal SA ADR, you can compare the effects of market volatilities on Commercial Metals 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 Commercial Metals with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commercial Metals and ArcelorMittal.
Diversification Opportunities for Commercial Metals and ArcelorMittal
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Commercial and ArcelorMittal is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Metals 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 Commercial Metals 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 Commercial Metals 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 Commercial Metals i.e., Commercial Metals and ArcelorMittal go up and down completely randomly.
Pair Corralation between Commercial Metals and ArcelorMittal
Considering the 90-day investment horizon Commercial Metals is expected to generate 1.51 times more return on investment than ArcelorMittal. However, Commercial Metals is 1.51 times more volatile than ArcelorMittal SA ADR. It trades about 0.19 of its potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about 0.03 per unit of risk. If you would invest 5,421 in Commercial Metals on August 31, 2024 and sell it today you would earn a total of 716.00 from holding Commercial Metals or generate 13.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commercial Metals vs. ArcelorMittal SA ADR
Performance |
| Timeline |
| Commercial Metals |
| ArcelorMittal SA ADR |
Commercial Metals and ArcelorMittal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commercial Metals and ArcelorMittal
The main advantage of trading using opposite Commercial Metals and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commercial Metals 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.| Commercial Metals vs. Nucor Corp | Commercial Metals vs. Steel Dynamics | Commercial Metals vs. ArcelorMittal SA ADR | Commercial Metals vs. Gerdau SA ADR |
| ArcelorMittal vs. Olympic Steel | ArcelorMittal vs. Ternium SA ADR | ArcelorMittal vs. Gerdau SA ADR | ArcelorMittal vs. POSCO Holdings |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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