Correlation Between Compagnie and ArcelorMittal

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

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

Diversification Opportunities for Compagnie and ArcelorMittal

0.74

Correlation Coefficient

Compagnie  ArcelorMittal

Poor diversification

The 3 months correlation between Compagnie and ArcelorMittal is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA and Compagnie 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 Compagnie de Saint Gobain 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 Compagnie i.e., Compagnie and ArcelorMittal go up and down completely randomly.

Pair Corralation between Compagnie and ArcelorMittal

Assuming the 90 days trading horizon Compagnie is expected to generate 1.91 times less return on investment than ArcelorMittal. But when comparing it to its historical volatility, Compagnie de Saint Gobain is 1.48 times less risky than ArcelorMittal. It trades about 0.04 of its potential returns per unit of risk. ArcelorMittal SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Compagnie de Saint Gobain  vs.  ArcelorMittal SA

Compagnie de Saint

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Compagnie is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ArcelorMittal SA

Risk-Adjusted Performance

4 of 100

OK

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 Compagnie and ArcelorMittal

The main advantage of trading using opposite Compagnie and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie 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 Compagnie de Saint Gobain 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.