Correlation Between Global Ship and ArcelorMittal
Can any of the company-specific risk be diversified away by investing in both Global Ship 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 Global Ship and ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Ship Lease and ArcelorMittal SA ADR, you can compare the effects of market volatilities on Global Ship 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 Global Ship with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and ArcelorMittal.
Diversification Opportunities for Global Ship and ArcelorMittal
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and ArcelorMittal is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease 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 Global Ship 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 Global Ship Lease 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 Global Ship i.e., Global Ship and ArcelorMittal go up and down completely randomly.
Pair Corralation between Global Ship and ArcelorMittal
Assuming the 90 days trading horizon Global Ship is expected to generate 33.46 times less return on investment than ArcelorMittal. But when comparing it to its historical volatility, Global Ship Lease is 3.32 times less risky than ArcelorMittal. It trades about 0.01 of its potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,438 in ArcelorMittal SA ADR on September 1, 2024 and sell it today you would earn a total of 90.00 from holding ArcelorMittal SA ADR or generate 3.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Ship Lease vs. ArcelorMittal SA ADR
Performance |
| Timeline |
| Global Ship Lease |
| ArcelorMittal SA ADR |
Global Ship and ArcelorMittal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Ship and ArcelorMittal
The main advantage of trading using opposite Global Ship and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship 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.| Global Ship vs. Safe Bulkers | Global Ship vs. Diana Shipping | Global Ship vs. Costamare | Global Ship vs. Safe Bulkers |
| 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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