Correlation Between ArcelorMittal and ENCE Energa

Can any of the company-specific risk be diversified away by investing in both ArcelorMittal and ENCE Energa 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 ENCE Energa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ArcelorMittal SA and ENCE Energa y, you can compare the effects of market volatilities on ArcelorMittal and ENCE Energa 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 ENCE Energa. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcelorMittal and ENCE Energa.

Diversification Opportunities for ArcelorMittal and ENCE Energa

-0.3

Correlation Coefficient

ArcelorMittal  ENCE Energa

Very good diversification

The 3 months correlation between ArcelorMittal and ENCE is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA and ENCE Energa y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENCE Energa y 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 are associated (or correlated) with ENCE Energa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENCE Energa y has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and ENCE Energa go up and down completely randomly.

Pair Corralation between ArcelorMittal and ENCE Energa

Assuming the 90 days trading horizon ArcelorMittal SA is expected to generate 1.38 times more return on investment than ENCE Energa. However, ArcelorMittal is 1.38 times more volatile than ENCE Energa y. It trades about 0.18 of its potential returns per unit of risk. ENCE Energa y is currently generating about -0.03 per unit of risk. If you would invest  1,997  in ArcelorMittal SA on September 12, 2024 and sell it today you would earn a total of  459.00  from holding ArcelorMittal SA or generate 22.98% return on investment over 90 days.

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

ArcelorMittal SA  vs.  ENCE Energa y

ArcelorMittal SA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, ArcelorMittal exhibited solid returns over the last few months and may actually be approaching a breakup point.

ENCE Energa y

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENCE Energa y has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, ENCE Energa is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ArcelorMittal and ENCE Energa

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

The idea behind ArcelorMittal SA and ENCE Energa y 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.