Correlation Between Energy and ArcelorMittal
Can any of the company-specific risk be diversified away by investing in both Energy 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 Energy and ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy and Environmental and ArcelorMittal SA ADR, you can compare the effects of market volatilities on Energy 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 Energy with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy and ArcelorMittal.
Diversification Opportunities for Energy and ArcelorMittal
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Energy and ArcelorMittal is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Energy and Environmental 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 Energy 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 Energy and Environmental 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 Energy i.e., Energy and ArcelorMittal go up and down completely randomly.
Pair Corralation between Energy and ArcelorMittal
Given the investment horizon of 90 days Energy and Environmental is expected to under-perform the ArcelorMittal. But the pink sheet apears to be less risky and, when comparing its historical volatility, Energy and Environmental is 1.91 times less risky than ArcelorMittal. The pink sheet trades about -0.23 of its potential returns per unit of risk. The ArcelorMittal SA ADR is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 2,286 in ArcelorMittal SA ADR on November 2, 2024 and sell it today you would earn a total of 237.00 from holding ArcelorMittal SA ADR or generate 10.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy and Environmental vs. ArcelorMittal SA ADR
Performance |
| Timeline |
| Energy and Environmental |
| ArcelorMittal SA ADR |
Energy and ArcelorMittal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy and ArcelorMittal
The main advantage of trading using opposite Energy and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy 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.| Energy vs. Alumifuel Pwr Corp | Energy vs. Gulf Resources | Energy vs. First Graphene | Energy vs. ASP Isotopes Common |
| ArcelorMittal vs. Agnico Eagle Mines | ArcelorMittal vs. Pan American Silver | ArcelorMittal vs. Kinross Gold | ArcelorMittal vs. Newmont Goldcorp Corp |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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