Correlation Between Synalloy and ArcelorMittal

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

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

Diversification Opportunities for Synalloy and ArcelorMittal

0.75

Correlation Coefficient

Synalloy  ArcelorMittal

Poor diversification

The 3 months correlation between Synalloy and ArcelorMittal is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Synalloy and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA and Synalloy 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 Synalloy 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 Synalloy i.e., Synalloy and ArcelorMittal go up and down completely randomly.

Pair Corralation between Synalloy and ArcelorMittal

Given the investment horizon of 90 days Synalloy is expected to generate 1.69 times more return on investment than ArcelorMittal. However, Synalloy is 1.69 times more volatile than ArcelorMittal SA. It trades about 0.14 of its potential returns per unit of risk. ArcelorMittal SA is currently generating about 0.13 per unit of risk. If you would invest  925.00  in Synalloy on September 13, 2024 and sell it today you would earn a total of  251.00  from holding Synalloy or generate 27.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

Synalloy  vs.  ArcelorMittal SA

Synalloy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Synalloy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Synalloy unveiled solid returns over the last few months and may actually be approaching a breakup point.

ArcelorMittal SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, ArcelorMittal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Synalloy and ArcelorMittal

The main advantage of trading using opposite Synalloy and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synalloy 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 Synalloy 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.