Correlation Between ArcelorMittal and Grupo Simec

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

By analyzing existing cross correlation between ArcelorMittal SA and Grupo Simec SAB, you can compare the effects of market volatilities on ArcelorMittal and Grupo Simec 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 Grupo Simec. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcelorMittal and Grupo Simec.

Diversification Opportunities for ArcelorMittal and Grupo Simec

-0.4

Correlation Coefficient

ArcelorMittal  Grupo Simec

Very good diversification

The 3 months correlation between ArcelorMittal and Grupo is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA and Grupo Simec SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Simec SAB 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 Grupo Simec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Simec SAB has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Grupo Simec go up and down completely randomly.

Pair Corralation between ArcelorMittal and Grupo Simec

Assuming the 90 days horizon ArcelorMittal SA is expected to generate 0.66 times more return on investment than Grupo Simec. However, ArcelorMittal SA is 1.53 times less risky than Grupo Simec. It trades about 0.16 of its potential returns per unit of risk. Grupo Simec SAB is currently generating about -0.01 per unit of risk. If you would invest  2,150  in ArcelorMittal SA on September 14, 2024 and sell it today you would earn a total of  389.00  from holding ArcelorMittal SA or generate 18.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.49%
Values	Daily Returns

ArcelorMittal SA  vs.  Grupo Simec SAB

ArcelorMittal SA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ArcelorMittal reported solid returns over the last few months and may actually be approaching a breakup point.

Grupo Simec SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Simec SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Grupo Simec is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ArcelorMittal and Grupo Simec

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

The idea behind ArcelorMittal SA and Grupo Simec SAB 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.