Correlation Between ArcelorMittal and Nexstar Broadcasting

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

Diversification Opportunities for ArcelorMittal and Nexstar Broadcasting

0.22

Correlation Coefficient

ArcelorMittal  Nexstar Broadcasting

Modest diversification

The 3 months correlation between ArcelorMittal and Nexstar is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and Nexstar Broadcasting Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexstar Broadcasting 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 Nexstar Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexstar Broadcasting has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Nexstar Broadcasting go up and down completely randomly.

Pair Corralation between ArcelorMittal and Nexstar Broadcasting

Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to generate 1.38 times more return on investment than Nexstar Broadcasting. However, ArcelorMittal is 1.38 times more volatile than Nexstar Broadcasting Group. It trades about -0.08 of its potential returns per unit of risk. Nexstar Broadcasting Group is currently generating about -0.23 per unit of risk. If you would invest  2,394  in ArcelorMittal SA ADR on September 27, 2024 and sell it today you would lose (77.00) from holding ArcelorMittal SA ADR or give up 3.22% 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.  Nexstar Broadcasting Group

ArcelorMittal SA ADR

Risk-Adjusted Performance

0 of 100

Very 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 latest unfluctuating 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.

Nexstar Broadcasting

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ArcelorMittal and Nexstar Broadcasting

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

The idea behind ArcelorMittal SA ADR and Nexstar Broadcasting Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.