Correlation Between ArcelorMittal South and AfricaRhodium ETF

Can any of the company-specific risk be diversified away by investing in both ArcelorMittal South and AfricaRhodium ETF 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 AfricaRhodium ETF 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 AfricaRhodium ETF, you can compare the effects of market volatilities on ArcelorMittal South and AfricaRhodium ETF 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 AfricaRhodium ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcelorMittal South and AfricaRhodium ETF.

Diversification Opportunities for ArcelorMittal South and AfricaRhodium ETF

0.1

Correlation Coefficient

ArcelorMittal South  AfricaRhodium ETF

Average diversification

The 3 months correlation between ArcelorMittal and AfricaRhodium is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal South Africa and AfricaRhodium ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AfricaRhodium ETF 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 AfricaRhodium ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AfricaRhodium ETF has no effect on the direction of ArcelorMittal South i.e., ArcelorMittal South and AfricaRhodium ETF go up and down completely randomly.

Pair Corralation between ArcelorMittal South and AfricaRhodium ETF

Assuming the 90 days trading horizon ArcelorMittal South Africa is expected to generate 1.89 times more return on investment than AfricaRhodium ETF. However, ArcelorMittal South is 1.89 times more volatile than AfricaRhodium ETF. It trades about 0.03 of its potential returns per unit of risk. AfricaRhodium ETF is currently generating about -0.02 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	Insignificant
Accuracy	98.46%
Values	Daily Returns

ArcelorMittal South Africa  vs.  AfricaRhodium ETF

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.

AfricaRhodium ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AfricaRhodium ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AfricaRhodium ETF is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ArcelorMittal South and AfricaRhodium ETF

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

The idea behind ArcelorMittal South Africa and AfricaRhodium ETF 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.