Correlation Between ArcelorMittal and ZK International

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

Diversification Opportunities for ArcelorMittal and ZK International

0.41

Correlation Coefficient

ArcelorMittal  ZK International

Very weak diversification

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

Pair Corralation between ArcelorMittal and ZK International

Allowing for the 90-day total investment horizon ArcelorMittal is expected to generate 3.59 times less return on investment than ZK International. But when comparing it to its historical volatility, ArcelorMittal SA ADR is 3.38 times less risky than ZK International. It trades about 0.13 of its potential returns per unit of risk. ZK International Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  50.00  in ZK International Group on September 12, 2024 and sell it today you would earn a total of  29.00  from holding ZK International Group or generate 58.0% 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.  ZK International Group

ArcelorMittal SA ADR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, ArcelorMittal unveiled solid returns over the last few months and may actually be approaching a breakup point.

ZK International

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ZK International Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, ZK International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ArcelorMittal and ZK International

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

The idea behind ArcelorMittal SA ADR and ZK International 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.