Correlation Between ArcelorMittal and RBC Bearings

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

Diversification Opportunities for ArcelorMittal and RBC Bearings

0.41

Correlation Coefficient

ArcelorMittal  RBC Bearings

Very weak diversification

The 3 months correlation between ArcelorMittal and RBC is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings 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 RBC Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Bearings has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and RBC Bearings go up and down completely randomly.

Pair Corralation between ArcelorMittal and RBC Bearings

Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to generate 1.89 times more return on investment than RBC Bearings. However, ArcelorMittal is 1.89 times more volatile than RBC Bearings Incorporated. It trades about -0.17 of its potential returns per unit of risk. RBC Bearings Incorporated is currently generating about -0.49 per unit of risk. If you would invest  2,486  in ArcelorMittal SA ADR on September 24, 2024 and sell it today you would lose (168.00) from holding ArcelorMittal SA ADR or give up 6.76% of portfolio value over 90 days.

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

ArcelorMittal SA ADR  vs.  RBC Bearings Incorporated

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 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.

RBC Bearings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, RBC Bearings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ArcelorMittal and RBC Bearings

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

The idea behind ArcelorMittal SA ADR and RBC Bearings Incorporated 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.