Correlation Between ArcelorMittal and Aperam SA

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

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

Diversification Opportunities for ArcelorMittal and Aperam SA

0.85

Correlation Coefficient

ArcelorMittal  Aperam SA

Very poor diversification

The 3 months correlation between ArcelorMittal and Aperam is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal and Aperam SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aperam SA 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 are associated (or correlated) with Aperam SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aperam SA has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Aperam SA go up and down completely randomly.

Pair Corralation between ArcelorMittal and Aperam SA

Assuming the 90 days trading horizon ArcelorMittal is expected to generate 1.06 times less return on investment than Aperam SA. In addition to that, ArcelorMittal is 1.25 times more volatile than Aperam SA. It trades about 0.15 of its total potential returns per unit of risk. Aperam SA is currently generating about 0.2 per unit of volatility. If you would invest  2,289  in Aperam SA on September 12, 2024 and sell it today you would earn a total of  537.00  from holding Aperam SA or generate 23.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

ArcelorMittal  vs.  Aperam SA

ArcelorMittal

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal 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.

Aperam SA

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aperam SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aperam SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ArcelorMittal and Aperam SA

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

The idea behind ArcelorMittal and Aperam SA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.