Correlation Between ArcelorMittal South and Sabvest Capital

Can any of the company-specific risk be diversified away by investing in both ArcelorMittal South and Sabvest Capital 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 Sabvest Capital 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 Sabvest Capital, you can compare the effects of market volatilities on ArcelorMittal South and Sabvest Capital 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 Sabvest Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcelorMittal South and Sabvest Capital.

Diversification Opportunities for ArcelorMittal South and Sabvest Capital

-0.13

Correlation Coefficient

ArcelorMittal South  Sabvest Capital

Good diversification

The 3 months correlation between ArcelorMittal and Sabvest is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal South Africa and Sabvest Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabvest Capital 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 Sabvest Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabvest Capital has no effect on the direction of ArcelorMittal South i.e., ArcelorMittal South and Sabvest Capital go up and down completely randomly.

Pair Corralation between ArcelorMittal South and Sabvest Capital

Assuming the 90 days trading horizon ArcelorMittal South is expected to generate 1.46 times less return on investment than Sabvest Capital. In addition to that, ArcelorMittal South is 2.17 times more volatile than Sabvest Capital. It trades about 0.03 of its total potential returns per unit of risk. Sabvest Capital is currently generating about 0.1 per unit of volatility. If you would invest  745,000  in Sabvest Capital on September 15, 2024 and sell it today you would earn a total of  125,000  from holding Sabvest Capital or generate 16.78% return on investment over 90 days.

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

ArcelorMittal South Africa  vs.  Sabvest Capital

ArcelorMittal South

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal South Africa are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, ArcelorMittal South may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sabvest Capital

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sabvest Capital are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sabvest Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ArcelorMittal South and Sabvest Capital

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

The idea behind ArcelorMittal South Africa and Sabvest Capital 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.