Correlation Between ArcelorMittal and Daido Steel

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

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

Diversification Opportunities for ArcelorMittal and Daido Steel

-0.65

Correlation Coefficient

ArcelorMittal  Daido Steel

Excellent diversification

The 3 months correlation between ArcelorMittal and Daido is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal and Daido Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daido Steel 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 Daido Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daido Steel has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Daido Steel go up and down completely randomly.

Pair Corralation between ArcelorMittal and Daido Steel

Assuming the 90 days trading horizon ArcelorMittal is expected to generate 1.31 times more return on investment than Daido Steel. However, ArcelorMittal is 1.31 times more volatile than Daido Steel Co. It trades about 0.17 of its potential returns per unit of risk. Daido Steel Co is currently generating about -0.18 per unit of risk. If you would invest  1,970  in ArcelorMittal on September 13, 2024 and sell it today you would earn a total of  470.00  from holding ArcelorMittal or generate 23.86% return on investment over 90 days.

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

ArcelorMittal  vs.  Daido Steel Co

ArcelorMittal

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, ArcelorMittal reported solid returns over the last few months and may actually be approaching a breakup point.

Daido Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daido Steel Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ArcelorMittal and Daido Steel

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

The idea behind ArcelorMittal and Daido Steel Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.