Correlation Between Acerinox and ArcelorMittal

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

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

Diversification Opportunities for Acerinox and ArcelorMittal

0.15

Correlation Coefficient

Acerinox  ArcelorMittal

Average diversification

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

Pair Corralation between Acerinox and ArcelorMittal

Assuming the 90 days horizon Acerinox is expected to generate 3.03 times less return on investment than ArcelorMittal. In addition to that, Acerinox is 1.16 times more volatile than ArcelorMittal SA ADR. It trades about 0.04 of its total potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about 0.13 per unit of volatility. If you would invest  2,217  in ArcelorMittal SA ADR on September 12, 2024 and sell it today you would earn a total of  357.00  from holding ArcelorMittal SA ADR or generate 16.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Acerinox SA ADR  vs.  ArcelorMittal SA ADR

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 newest stock price disturbance, may contribute to short-term losses for the investors.

ArcelorMittal SA ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, ArcelorMittal unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Acerinox and ArcelorMittal

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

The idea behind Acerinox SA ADR and ArcelorMittal 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.