Correlation Between Koninklijke Philips and ArcelorMittal

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

By analyzing existing cross correlation between Koninklijke Philips NV and ArcelorMittal SA, you can compare the effects of market volatilities on Koninklijke Philips and ArcelorMittal 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 Koninklijke Philips with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke Philips and ArcelorMittal.

Diversification Opportunities for Koninklijke Philips and ArcelorMittal

-0.58

Correlation Coefficient

Koninklijke Philips  ArcelorMittal

Excellent diversification

The 3 months correlation between Koninklijke and ArcelorMittal is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Philips NV and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA and Koninklijke Philips 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 Koninklijke Philips NV are associated (or correlated) with ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA has no effect on the direction of Koninklijke Philips i.e., Koninklijke Philips and ArcelorMittal go up and down completely randomly.

Pair Corralation between Koninklijke Philips and ArcelorMittal

Assuming the 90 days trading horizon Koninklijke Philips NV is expected to under-perform the ArcelorMittal. In addition to that, Koninklijke Philips is 1.32 times more volatile than ArcelorMittal SA. It trades about -0.08 of its total potential returns per unit of risk. ArcelorMittal SA is currently generating about 0.05 per unit of volatility. If you would invest  2,169  in ArcelorMittal SA on September 19, 2024 and sell it today you would earn a total of  122.00  from holding ArcelorMittal SA or generate 5.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Koninklijke Philips NV  vs.  ArcelorMittal SA

Koninklijke Philips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke Philips NV 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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ArcelorMittal SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ArcelorMittal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Koninklijke Philips and ArcelorMittal

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

The idea behind Koninklijke Philips NV and ArcelorMittal SA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..