Correlation Between Nippon Steel and ArcelorMittal
Can any of the company-specific risk be diversified away by investing in both Nippon Steel 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 Nippon Steel and ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nippon Steel and ArcelorMittal, you can compare the effects of market volatilities on Nippon Steel 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 Nippon Steel with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Steel and ArcelorMittal.
Diversification Opportunities for Nippon Steel and ArcelorMittal
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nippon and ArcelorMittal is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and ArcelorMittal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal and Nippon Steel 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 Nippon Steel 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 has no effect on the direction of Nippon Steel i.e., Nippon Steel and ArcelorMittal go up and down completely randomly.
Pair Corralation between Nippon Steel and ArcelorMittal
Assuming the 90 days horizon Nippon Steel is expected to generate 1.26 times more return on investment than ArcelorMittal. However, Nippon Steel is 1.26 times more volatile than ArcelorMittal. It trades about 0.03 of its potential returns per unit of risk. ArcelorMittal is currently generating about 0.0 per unit of risk. If you would invest 1,542 in Nippon Steel on August 25, 2024 and sell it today you would earn a total of 283.00 from holding Nippon Steel or generate 18.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Nippon Steel vs. ArcelorMittal
Performance |
| Timeline |
| Nippon Steel |
| ArcelorMittal |
Nippon Steel and ArcelorMittal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nippon Steel and ArcelorMittal
The main advantage of trading using opposite Nippon Steel and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Steel 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.| Nippon Steel vs. GigaMedia | Nippon Steel vs. Flutter Entertainment PLC | Nippon Steel vs. Taiwan Semiconductor Manufacturing | Nippon Steel vs. Tower Semiconductor |
| ArcelorMittal vs. Ming Le Sports | ArcelorMittal vs. ANTA SPORTS PRODUCT | ArcelorMittal vs. Commercial Vehicle Group | ArcelorMittal vs. Merit Medical Systems |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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