Correlation Between ArcelorMittal and Codexis

Can any of the company-specific risk be diversified away by investing in both ArcelorMittal and Codexis 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 Codexis 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 Codexis, you can compare the effects of market volatilities on ArcelorMittal and Codexis 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 Codexis. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcelorMittal and Codexis.

Diversification Opportunities for ArcelorMittal and Codexis

0.46

Correlation Coefficient

ArcelorMittal  Codexis

Very weak diversification

The 3 months correlation between ArcelorMittal and Codexis is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and Codexis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Codexis 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 Codexis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Codexis has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Codexis go up and down completely randomly.

Pair Corralation between ArcelorMittal and Codexis

Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to under-perform the Codexis. But the stock apears to be less risky and, when comparing its historical volatility, ArcelorMittal SA ADR is 2.94 times less risky than Codexis. The stock trades about 0.0 of its potential returns per unit of risk. The Codexis is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  468.00  in Codexis on September 19, 2024 and sell it today you would earn a total of  51.00  from holding Codexis or generate 10.9% return on investment over 90 days.

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

ArcelorMittal SA ADR  vs.  Codexis

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.

Codexis

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Codexis are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Codexis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ArcelorMittal and Codexis

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

The idea behind ArcelorMittal SA ADR and Codexis 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.