Correlation Between Allan Gray and ArcelorMittal South

Can any of the company-specific risk be diversified away by investing in both Allan Gray and ArcelorMittal South 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 Allan Gray and ArcelorMittal South into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Allan Gray Equity and ArcelorMittal South Africa, you can compare the effects of market volatilities on Allan Gray and ArcelorMittal South 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 Allan Gray with a short position of ArcelorMittal South. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allan Gray and ArcelorMittal South.

Diversification Opportunities for Allan Gray and ArcelorMittal South

0.26

Correlation Coefficient

Allan Gray  ArcelorMittal South

Modest diversification

The 3 months correlation between Allan and ArcelorMittal is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Allan Gray Equity and ArcelorMittal South Africa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal South and Allan Gray 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 Allan Gray Equity are associated (or correlated) with ArcelorMittal South. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal South has no effect on the direction of Allan Gray i.e., Allan Gray and ArcelorMittal South go up and down completely randomly.

Pair Corralation between Allan Gray and ArcelorMittal South

Assuming the 90 days trading horizon Allan Gray Equity is expected to generate 0.13 times more return on investment than ArcelorMittal South. However, Allan Gray Equity is 7.73 times less risky than ArcelorMittal South. It trades about 0.07 of its potential returns per unit of risk. ArcelorMittal South Africa is currently generating about -0.03 per unit of risk. If you would invest  50,162  in Allan Gray Equity on September 14, 2024 and sell it today you would earn a total of  10,844  from holding Allan Gray Equity or generate 21.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Allan Gray Equity  vs.  ArcelorMittal South Africa

Allan Gray Equity

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allan Gray Equity are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong basic indicators, Allan Gray is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

ArcelorMittal South

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal South Africa are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, ArcelorMittal South may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Allan Gray and ArcelorMittal South

The main advantage of trading using opposite Allan Gray and ArcelorMittal South positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allan Gray position performs unexpectedly, ArcelorMittal South 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 South will offset losses from the drop in ArcelorMittal South's long position.

The idea behind Allan Gray Equity and ArcelorMittal South Africa 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.