Correlation Between ArcelorMittal and BE Semiconductor

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

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

Diversification Opportunities for ArcelorMittal and BE Semiconductor

0.54

Correlation Coefficient

ArcelorMittal  BE Semiconductor

Very weak diversification

The 3 months correlation between ArcelorMittal and BESI is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA and BE Semiconductor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BE Semiconductor Ind 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 BE Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BE Semiconductor Ind has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and BE Semiconductor go up and down completely randomly.

Pair Corralation between ArcelorMittal and BE Semiconductor

Assuming the 90 days horizon ArcelorMittal SA is expected to under-perform the BE Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, ArcelorMittal SA is 1.36 times less risky than BE Semiconductor. The stock trades about -0.14 of its potential returns per unit of risk. The BE Semiconductor Industries is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  11,055  in BE Semiconductor Industries on September 19, 2024 and sell it today you would earn a total of  1,795  from holding BE Semiconductor Industries or generate 16.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

ArcelorMittal SA  vs.  BE Semiconductor Industries

ArcelorMittal SA

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ArcelorMittal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BE Semiconductor Ind

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BE Semiconductor Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BE Semiconductor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ArcelorMittal and BE Semiconductor

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

The idea behind ArcelorMittal SA and BE Semiconductor Industries 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.