Correlation Between NiSource and ArcelorMittal

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Can any of the company-specific risk be diversified away by investing in both NiSource 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 NiSource and ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NiSource and ArcelorMittal SA ADR, you can compare the effects of market volatilities on NiSource 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 NiSource with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of NiSource and ArcelorMittal.

Diversification Opportunities for NiSource and ArcelorMittal

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between NiSource and ArcelorMittal is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NiSource 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 NiSource 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 NiSource 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 NiSource i.e., NiSource and ArcelorMittal go up and down completely randomly.

Pair Corralation between NiSource and ArcelorMittal

Allowing for the 90-day total investment horizon NiSource is expected to generate 0.44 times more return on investment than ArcelorMittal. However, NiSource is 2.29 times less risky than ArcelorMittal. It trades about 0.26 of its potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about 0.07 per unit of risk. If you would invest  3,256  in NiSource on August 25, 2024 and sell it today you would earn a total of  515.00  from holding NiSource or generate 15.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

NiSource  vs.  ArcelorMittal SA ADR

 Performance 
       Timeline  
NiSource 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, NiSource demonstrated solid returns over the last few months and may actually be approaching a breakup point.
ArcelorMittal SA ADR 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, ArcelorMittal may actually be approaching a critical reversion point that can send shares even higher in December 2024.

NiSource and ArcelorMittal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NiSource and ArcelorMittal

The main advantage of trading using opposite NiSource and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NiSource 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.
The idea behind NiSource and ArcelorMittal SA ADR 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.
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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