Correlation Between High Yield and ArcelorMittal

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

By analyzing existing cross correlation between High Yield Municipal Fund and ArcelorMittal SA ADR, you can compare the effects of market volatilities on High Yield 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 High Yield with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and ArcelorMittal.

Diversification Opportunities for High Yield and ArcelorMittal

0.23

Correlation Coefficient

High Yield  ArcelorMittal

Modest diversification

The 3 months correlation between High and ArcelorMittal is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund 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 High Yield 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 High Yield Municipal Fund 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 High Yield i.e., High Yield and ArcelorMittal go up and down completely randomly.

Pair Corralation between High Yield and ArcelorMittal

Assuming the 90 days horizon High Yield is expected to generate 393.75 times less return on investment than ArcelorMittal. But when comparing it to its historical volatility, High Yield Municipal Fund is 6.85 times less risky than ArcelorMittal. It trades about 0.0 of its potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,264  in ArcelorMittal SA ADR on September 15, 2024 and sell it today you would earn a total of  207.00  from holding ArcelorMittal SA ADR or generate 9.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

High Yield Municipal Fund  vs.  ArcelorMittal SA ADR

High Yield Municipal

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days High Yield Municipal Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, High Yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ArcelorMittal SA ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA ADR are ranked lower than 6 (%) 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 January 2025.

Pair Trading with High Yield and ArcelorMittal

The main advantage of trading using opposite High Yield and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield 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 High Yield Municipal Fund 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.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.