Correlation Between Constellium and ArcelorMittal
Can any of the company-specific risk be diversified away by investing in both Constellium 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 Constellium and ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Constellium Nv and ArcelorMittal SA ADR, you can compare the effects of market volatilities on Constellium 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 Constellium with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellium and ArcelorMittal.
Diversification Opportunities for Constellium and ArcelorMittal
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Constellium and ArcelorMittal is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Constellium Nv 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 Constellium 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 Constellium Nv 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 Constellium i.e., Constellium and ArcelorMittal go up and down completely randomly.
Pair Corralation between Constellium and ArcelorMittal
Given the investment horizon of 90 days Constellium Nv is expected to generate 1.4 times more return on investment than ArcelorMittal. However, Constellium is 1.4 times more volatile than ArcelorMittal SA ADR. It trades about 0.01 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 1,175 in Constellium Nv on September 13, 2024 and sell it today you would lose (4.00) from holding Constellium Nv or give up 0.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Constellium Nv vs. ArcelorMittal SA ADR
Performance |
| Timeline |
| Constellium Nv |
| ArcelorMittal SA ADR |
Constellium and ArcelorMittal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Constellium and ArcelorMittal
The main advantage of trading using opposite Constellium and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellium 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.| Constellium vs. Century Aluminum | Constellium vs. Alcoa Corp | Constellium vs. China Hongqiao Group | Constellium vs. Norsk Hydro ASA |
| ArcelorMittal vs. Fortitude Gold Corp | ArcelorMittal vs. New Gold | ArcelorMittal vs. Galiano Gold | ArcelorMittal vs. GoldMining |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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