Correlation Between TKH Group and ArcelorMittal

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

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

Diversification Opportunities for TKH Group and ArcelorMittal

-0.62

Correlation Coefficient

TKH Group  ArcelorMittal

Excellent diversification

The 3 months correlation between TKH and ArcelorMittal is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding TKH Group NV and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA and TKH Group 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 TKH Group 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 TKH Group i.e., TKH Group and ArcelorMittal go up and down completely randomly.

Pair Corralation between TKH Group and ArcelorMittal

Assuming the 90 days trading horizon TKH Group NV is expected to under-perform the ArcelorMittal. But the stock apears to be less risky and, when comparing its historical volatility, TKH Group NV is 1.12 times less risky than ArcelorMittal. The stock trades about -0.18 of its potential returns per unit of risk. The ArcelorMittal SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,090  in ArcelorMittal SA on September 18, 2024 and sell it today you would earn a total of  271.00  from holding ArcelorMittal SA or generate 12.97% return on investment over 90 days.

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

TKH Group NV  vs.  ArcelorMittal SA

TKH Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TKH Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ArcelorMittal SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ArcelorMittal unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TKH Group and ArcelorMittal

The main advantage of trading using opposite TKH Group and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TKH Group 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 TKH Group 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 Commodity Directory module to find actively traded commodities issued by global exchanges.