Correlation Between ArcelorMittal and Acerinox

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

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

Diversification Opportunities for ArcelorMittal and Acerinox

-0.15

Correlation Coefficient

ArcelorMittal  Acerinox

Good diversification

The 3 months correlation between ArcelorMittal and Acerinox is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA and Acerinox SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acerinox SA ADR and ArcelorMittal 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 SA are associated (or correlated) with Acerinox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acerinox SA ADR has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Acerinox go up and down completely randomly.

Pair Corralation between ArcelorMittal and Acerinox

Assuming the 90 days horizon ArcelorMittal SA is expected to generate 0.77 times more return on investment than Acerinox. However, ArcelorMittal SA is 1.31 times less risky than Acerinox. It trades about 0.13 of its potential returns per unit of risk. Acerinox SA ADR is currently generating about 0.04 per unit of risk. If you would invest  2,150  in ArcelorMittal SA on September 13, 2024 and sell it today you would earn a total of  281.00  from holding ArcelorMittal SA or generate 13.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

ArcelorMittal SA  vs.  Acerinox SA ADR

ArcelorMittal SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, ArcelorMittal reported solid returns over the last few months and may actually be approaching a breakup point.

Acerinox SA ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Acerinox SA ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Acerinox 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 and Acerinox

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

The idea behind ArcelorMittal SA and Acerinox 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.