Correlation Between ArcelorMittal South and Reinet Investments

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

By analyzing existing cross correlation between ArcelorMittal South Africa and Reinet Investments SCA, you can compare the effects of market volatilities on ArcelorMittal South and Reinet Investments 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 South with a short position of Reinet Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcelorMittal South and Reinet Investments.

Diversification Opportunities for ArcelorMittal South and Reinet Investments

0.06

Correlation Coefficient

ArcelorMittal South  Reinet Investments

Significant diversification

The 3 months correlation between ArcelorMittal and Reinet is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal South Africa and Reinet Investments SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reinet Investments SCA and ArcelorMittal South 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 South Africa are associated (or correlated) with Reinet Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reinet Investments SCA has no effect on the direction of ArcelorMittal South i.e., ArcelorMittal South and Reinet Investments go up and down completely randomly.

Pair Corralation between ArcelorMittal South and Reinet Investments

Assuming the 90 days trading horizon ArcelorMittal South Africa is expected to under-perform the Reinet Investments. In addition to that, ArcelorMittal South is 5.84 times more volatile than Reinet Investments SCA. It trades about -0.07 of its total potential returns per unit of risk. Reinet Investments SCA is currently generating about -0.07 per unit of volatility. If you would invest  4,668,100  in Reinet Investments SCA on October 11, 2024 and sell it today you would lose (218,100) from holding Reinet Investments SCA or give up 4.67% of portfolio value over 90 days.

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

ArcelorMittal South Africa  vs.  Reinet Investments SCA

ArcelorMittal South

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ArcelorMittal South Africa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Reinet Investments SCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reinet Investments SCA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Reinet Investments 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 South and Reinet Investments

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

The idea behind ArcelorMittal South Africa and Reinet Investments SCA 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.