Correlation Between Verra Mobility and ArcelorMittal
Can any of the company-specific risk be diversified away by investing in both Verra Mobility 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 Verra Mobility and ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verra Mobility Corp and ArcelorMittal SA ADR, you can compare the effects of market volatilities on Verra Mobility 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 Verra Mobility with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verra Mobility and ArcelorMittal.
Diversification Opportunities for Verra Mobility and ArcelorMittal
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Verra and ArcelorMittal is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Verra Mobility Corp 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 Verra Mobility 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 Verra Mobility Corp 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 Verra Mobility i.e., Verra Mobility and ArcelorMittal go up and down completely randomly.
Pair Corralation between Verra Mobility and ArcelorMittal
Given the investment horizon of 90 days Verra Mobility is expected to generate 1.01 times less return on investment than ArcelorMittal. But when comparing it to its historical volatility, Verra Mobility Corp is 1.44 times less risky than ArcelorMittal. It trades about 0.09 of its potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,457 in ArcelorMittal SA ADR on September 5, 2024 and sell it today you would earn a total of 67.00 from holding ArcelorMittal SA ADR or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verra Mobility Corp vs. ArcelorMittal SA ADR
Performance |
| Timeline |
| Verra Mobility Corp |
| ArcelorMittal SA ADR |
Verra Mobility and ArcelorMittal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verra Mobility and ArcelorMittal
The main advantage of trading using opposite Verra Mobility and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verra Mobility 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 Verra Mobility Corp 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.| ArcelorMittal vs. Constellium Nv | ArcelorMittal vs. Century Aluminum | ArcelorMittal vs. China Hongqiao Group | ArcelorMittal vs. Kaiser Aluminum |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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