Correlation Between ArcelorMittal and NovaGold Resources
Can any of the company-specific risk be diversified away by investing in both ArcelorMittal and NovaGold Resources 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 ArcelorMittal and NovaGold Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ArcelorMittal SA ADR and NovaGold Resources, you can compare the effects of market volatilities on ArcelorMittal and NovaGold Resources 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 ArcelorMittal with a short position of NovaGold Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcelorMittal and NovaGold Resources.
Diversification Opportunities for ArcelorMittal and NovaGold Resources
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ArcelorMittal and NovaGold is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and NovaGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaGold Resources and ArcelorMittal 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 ArcelorMittal SA ADR are associated (or correlated) with NovaGold Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NovaGold Resources has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and NovaGold Resources go up and down completely randomly.
Pair Corralation between ArcelorMittal and NovaGold Resources
Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to under-perform the NovaGold Resources. But the stock apears to be less risky and, when comparing its historical volatility, ArcelorMittal SA ADR is 1.35 times less risky than NovaGold Resources. The stock trades about -0.06 of its potential returns per unit of risk. The NovaGold Resources is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 363.00 in NovaGold Resources on August 29, 2024 and sell it today you would lose (6.00) from holding NovaGold Resources or give up 1.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ArcelorMittal SA ADR vs. NovaGold Resources
Performance |
| Timeline |
| ArcelorMittal SA ADR |
| NovaGold Resources |
ArcelorMittal and NovaGold Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ArcelorMittal and NovaGold Resources
The main advantage of trading using opposite ArcelorMittal and NovaGold Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ArcelorMittal position performs unexpectedly, NovaGold Resources 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 NovaGold Resources will offset losses from the drop in NovaGold Resources' long position.| ArcelorMittal vs. Olympic Steel | ArcelorMittal vs. Ternium SA ADR | ArcelorMittal vs. Gerdau SA ADR | ArcelorMittal vs. POSCO Holdings |
| NovaGold Resources vs. Seabridge Gold | NovaGold Resources vs. Eldorado Gold Corp | NovaGold Resources vs. New Gold | NovaGold Resources vs. IAMGold |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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