Correlation Between ArcelorMittal and Avient Corp

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

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

Diversification Opportunities for ArcelorMittal and Avient Corp

0.35

Correlation Coefficient

ArcelorMittal  Avient Corp

Weak diversification

The 3 months correlation between ArcelorMittal and Avient is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and Avient Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avient Corp 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 ADR are associated (or correlated) with Avient Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avient Corp has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Avient Corp go up and down completely randomly.

Pair Corralation between ArcelorMittal and Avient Corp

Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to generate 1.1 times more return on investment than Avient Corp. However, ArcelorMittal is 1.1 times more volatile than Avient Corp. It trades about -0.02 of its potential returns per unit of risk. Avient Corp is currently generating about -0.1 per unit of risk. If you would invest  2,413  in ArcelorMittal SA ADR on September 19, 2024 and sell it today you would lose (92.00) from holding ArcelorMittal SA ADR or give up 3.81% of portfolio value over 90 days.

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

ArcelorMittal SA ADR  vs.  Avient Corp

ArcelorMittal SA ADR

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days ArcelorMittal SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ArcelorMittal is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Avient Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avient Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with ArcelorMittal and Avient Corp

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

The idea behind ArcelorMittal SA ADR and Avient Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.