Correlation Between Dow Jones and ArcelorMittal
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and ArcelorMittal SA, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and ArcelorMittal.
Diversification Opportunities for Dow Jones and ArcelorMittal
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and ArcelorMittal is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and ArcelorMittal go up and down completely randomly.
Pair Corralation between Dow Jones and ArcelorMittal
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.33 times more return on investment than ArcelorMittal. However, Dow Jones Industrial is 3.07 times less risky than ArcelorMittal. It trades about 0.1 of its potential returns per unit of risk. ArcelorMittal SA is currently generating about -0.02 per unit of risk. If you would invest 3,360,115 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 1,069,536 from holding Dow Jones Industrial or generate 31.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 60.72% |
| Values | Daily Returns |
Dow Jones Industrial vs. ArcelorMittal SA
Performance |
| Timeline |
Dow Jones and ArcelorMittal Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
ArcelorMittal SA
Pair trading matchups for ArcelorMittal
Pair Trading with Dow Jones and ArcelorMittal
The main advantage of trading using opposite Dow Jones and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| ArcelorMittal vs. Acerinox SA ADR | ArcelorMittal vs. Algoma Steel Group | ArcelorMittal vs. Synalloy | ArcelorMittal vs. Algoma Steel Group |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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