Correlation Between ArcelorMittal and Nippon Steel
Can any of the company-specific risk be diversified away by investing in both ArcelorMittal and Nippon Steel 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 Nippon Steel 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 Nippon Steel, you can compare the effects of market volatilities on ArcelorMittal and Nippon Steel 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 Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcelorMittal and Nippon Steel.
Diversification Opportunities for ArcelorMittal and Nippon Steel
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ArcelorMittal and Nippon is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel 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 Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Nippon Steel go up and down completely randomly.
Pair Corralation between ArcelorMittal and Nippon Steel
Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to under-perform the Nippon Steel. But the stock apears to be less risky and, when comparing its historical volatility, ArcelorMittal SA ADR is 1.59 times less risky than Nippon Steel. The stock trades about -0.22 of its potential returns per unit of risk. The Nippon Steel is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,010 in Nippon Steel on September 22, 2024 and sell it today you would lose (13.00) from holding Nippon Steel or give up 0.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
ArcelorMittal SA ADR vs. Nippon Steel
Performance |
| Timeline |
| ArcelorMittal SA ADR |
| Nippon Steel |
ArcelorMittal and Nippon Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ArcelorMittal and Nippon Steel
The main advantage of trading using opposite ArcelorMittal and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ArcelorMittal position performs unexpectedly, Nippon Steel 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 Nippon Steel will offset losses from the drop in Nippon Steel's long position.The idea behind ArcelorMittal SA ADR and Nippon Steel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Nippon Steel vs. Companhia Siderurgica Nacional | Nippon Steel vs. Olympic Steel | Nippon Steel vs. Universal Stainless Alloy | Nippon Steel vs. Usinas Siderurgicas de |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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