Correlation Between ArcelorMittal and Westrock Coffee
Can any of the company-specific risk be diversified away by investing in both ArcelorMittal and Westrock Coffee 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 Westrock Coffee 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 Westrock Coffee, you can compare the effects of market volatilities on ArcelorMittal and Westrock Coffee 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 Westrock Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcelorMittal and Westrock Coffee.
Diversification Opportunities for ArcelorMittal and Westrock Coffee
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ArcelorMittal and Westrock is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and Westrock Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westrock Coffee 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 Westrock Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westrock Coffee has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Westrock Coffee go up and down completely randomly.
Pair Corralation between ArcelorMittal and Westrock Coffee
Allowing for the 90-day total investment horizon ArcelorMittal is expected to generate 1.25 times less return on investment than Westrock Coffee. But when comparing it to its historical volatility, ArcelorMittal SA ADR is 1.71 times less risky than Westrock Coffee. It trades about 0.29 of its potential returns per unit of risk. Westrock Coffee is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 635.00 in Westrock Coffee on November 2, 2024 and sell it today you would earn a total of 79.00 from holding Westrock Coffee or generate 12.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ArcelorMittal SA ADR vs. Westrock Coffee
Performance |
| Timeline |
| ArcelorMittal SA ADR |
| Westrock Coffee |
ArcelorMittal and Westrock Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ArcelorMittal and Westrock Coffee
The main advantage of trading using opposite ArcelorMittal and Westrock Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ArcelorMittal position performs unexpectedly, Westrock Coffee 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 Westrock Coffee will offset losses from the drop in Westrock Coffee's long position.| ArcelorMittal vs. Agnico Eagle Mines | ArcelorMittal vs. Pan American Silver | ArcelorMittal vs. Kinross Gold | ArcelorMittal vs. Newmont Goldcorp Corp |
| Westrock Coffee vs. General Mills | Westrock Coffee vs. Campbell Soup | Westrock Coffee vs. ConAgra Foods | Westrock Coffee vs. Hormel Foods |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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