Correlation Between ArcelorMittal and Universal Stainless

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

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

Diversification Opportunities for ArcelorMittal and Universal Stainless

0.62

Correlation Coefficient

ArcelorMittal  Universal Stainless

Poor diversification

The 3 months correlation between ArcelorMittal and Universal is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA and Universal Stainless Alloy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Stainless Alloy 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 Universal Stainless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Stainless Alloy has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Universal Stainless go up and down completely randomly.

Pair Corralation between ArcelorMittal and Universal Stainless

Assuming the 90 days horizon ArcelorMittal is expected to generate 60.07 times less return on investment than Universal Stainless. But when comparing it to its historical volatility, ArcelorMittal SA is 1.54 times less risky than Universal Stainless. It trades about 0.0 of its potential returns per unit of risk. Universal Stainless Alloy is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  702.00  in Universal Stainless Alloy on September 14, 2024 and sell it today you would earn a total of  3,721  from holding Universal Stainless Alloy or generate 530.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	67.27%
Values	Daily Returns

ArcelorMittal SA  vs.  Universal Stainless Alloy

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 uncertain basic indicators, ArcelorMittal reported solid returns over the last few months and may actually be approaching a breakup point.

Universal Stainless Alloy

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with ArcelorMittal and Universal Stainless

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

The idea behind ArcelorMittal SA and Universal Stainless Alloy 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.