Correlation Between ArcelorMittal South and Allan Gray

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

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

Diversification Opportunities for ArcelorMittal South and Allan Gray

0.23

Correlation Coefficient

ArcelorMittal South  Allan Gray

Modest diversification

The 3 months correlation between ArcelorMittal and Allan is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal South Africa and Allan Gray Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allan Gray Equity and ArcelorMittal South 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 ArcelorMittal South Africa are associated (or correlated) with Allan Gray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allan Gray Equity has no effect on the direction of ArcelorMittal South i.e., ArcelorMittal South and Allan Gray go up and down completely randomly.

Pair Corralation between ArcelorMittal South and Allan Gray

Assuming the 90 days trading horizon ArcelorMittal South Africa is expected to generate 12.04 times more return on investment than Allan Gray. However, ArcelorMittal South is 12.04 times more volatile than Allan Gray Equity. It trades about 0.03 of its potential returns per unit of risk. Allan Gray Equity is currently generating about 0.11 per unit of risk. If you would invest  12,500  in ArcelorMittal South Africa on September 15, 2024 and sell it today you would earn a total of  200.00  from holding ArcelorMittal South Africa or generate 1.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.38%
Values	Daily Returns

ArcelorMittal South Africa  vs.  Allan Gray Equity

ArcelorMittal South

Risk-Adjusted Performance

2 of 100

Weak

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.

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.

Pair Trading with ArcelorMittal South and Allan Gray

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

The idea behind ArcelorMittal South Africa and Allan Gray Equity 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.