Correlation Between Celanese and ArcelorMittal

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

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

Diversification Opportunities for Celanese and ArcelorMittal

-0.18

Correlation Coefficient

Celanese  ArcelorMittal

Good diversification

The 3 months correlation between Celanese and ArcelorMittal is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Celanese 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 Celanese 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 Celanese 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 Celanese i.e., Celanese and ArcelorMittal go up and down completely randomly.

Pair Corralation between Celanese and ArcelorMittal

Allowing for the 90-day total investment horizon Celanese is expected to under-perform the ArcelorMittal. In addition to that, Celanese is 2.0 times more volatile than ArcelorMittal SA ADR. It trades about -0.18 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  2,184  in ArcelorMittal SA ADR on September 4, 2024 and sell it today you would earn a total of  368.00  from holding ArcelorMittal SA ADR or generate 16.85% return on investment over 90 days.

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

Celanese  vs.  ArcelorMittal SA ADR

Celanese

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Celanese has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

ArcelorMittal SA ADR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA ADR are ranked lower than 10 (%) 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 Celanese and ArcelorMittal

The main advantage of trading using opposite Celanese and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Celanese 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 Celanese 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..