Correlation Between Koninklijke Philips and ArcelorMittal
Can any of the company-specific risk be diversified away by investing in both Koninklijke Philips 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 Koninklijke Philips and ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Koninklijke Philips NV and ArcelorMittal SA, you can compare the effects of market volatilities on Koninklijke Philips 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 Koninklijke Philips with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke Philips and ArcelorMittal.
Diversification Opportunities for Koninklijke Philips and ArcelorMittal
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Koninklijke and ArcelorMittal is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Philips NV and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA and Koninklijke Philips 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 Koninklijke Philips NV 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 has no effect on the direction of Koninklijke Philips i.e., Koninklijke Philips and ArcelorMittal go up and down completely randomly.
Pair Corralation between Koninklijke Philips and ArcelorMittal
Assuming the 90 days trading horizon Koninklijke Philips NV is expected to generate 1.41 times more return on investment than ArcelorMittal. However, Koninklijke Philips is 1.41 times more volatile than ArcelorMittal SA. It trades about 0.07 of its potential returns per unit of risk. ArcelorMittal SA is currently generating about 0.01 per unit of risk. If you would invest 1,164 in Koninklijke Philips NV on August 27, 2024 and sell it today you would earn a total of 1,358 from holding Koninklijke Philips NV or generate 116.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Koninklijke Philips NV vs. ArcelorMittal SA
Performance |
| Timeline |
| Koninklijke Philips |
| ArcelorMittal SA |
Koninklijke Philips and ArcelorMittal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Koninklijke Philips and ArcelorMittal
The main advantage of trading using opposite Koninklijke Philips and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke Philips 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.| Koninklijke Philips vs. Unilever PLC | Koninklijke Philips vs. ING Groep NV | Koninklijke Philips vs. Aegon NV | Koninklijke Philips vs. Koninklijke Ahold Delhaize |
| ArcelorMittal vs. ING Groep NV | ArcelorMittal vs. Aegon NV | ArcelorMittal vs. Compagnie de Saint Gobain | ArcelorMittal vs. Koninklijke Philips NV |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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