Correlation Between ArcelorMittal and United Airlines

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

Diversification Opportunities for ArcelorMittal and United Airlines

0.0

Correlation Coefficient

ArcelorMittal  United Airlines

Pay attention - limited upside

The 3 months correlation between ArcelorMittal and United is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines Holdings 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 United Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and United Airlines go up and down completely randomly.

Pair Corralation between ArcelorMittal and United Airlines

Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to under-perform the United Airlines. But the stock apears to be less risky and, when comparing its historical volatility, ArcelorMittal SA ADR is 1.54 times less risky than United Airlines. The stock trades about -0.08 of its potential returns per unit of risk. The United Airlines Holdings is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  5,799  in United Airlines Holdings on September 27, 2024 and sell it today you would earn a total of  4,287  from holding United Airlines Holdings or generate 73.93% return on investment over 90 days.

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

ArcelorMittal SA ADR  vs.  United Airlines Holdings

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.

United Airlines Holdings

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, United Airlines disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ArcelorMittal and United Airlines

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

The idea behind ArcelorMittal SA ADR and United Airlines Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.