Correlation Between ArcelorMittal and Rocky Brands

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

Diversification Opportunities for ArcelorMittal and Rocky Brands

-0.16

Correlation Coefficient

ArcelorMittal  Rocky Brands

Good diversification

The 3 months correlation between ArcelorMittal and Rocky is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and Rocky Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Brands 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 Rocky Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Brands has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Rocky Brands go up and down completely randomly.

Pair Corralation between ArcelorMittal and Rocky Brands

Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to under-perform the Rocky Brands. But the stock apears to be less risky and, when comparing its historical volatility, ArcelorMittal SA ADR is 1.18 times less risky than Rocky Brands. The stock trades about -0.17 of its potential returns per unit of risk. The Rocky Brands is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,253  in Rocky Brands on September 24, 2024 and sell it today you would earn a total of  31.00  from holding Rocky Brands or generate 1.38% return on investment over 90 days.

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

ArcelorMittal SA ADR  vs.  Rocky Brands

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.

Rocky Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ArcelorMittal and Rocky Brands

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

The idea behind ArcelorMittal SA ADR and Rocky Brands 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.