Correlation Between ArcelorMittal and Synalloy

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

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

Diversification Opportunities for ArcelorMittal and Synalloy

0.81

Correlation Coefficient

ArcelorMittal  Synalloy

Very poor diversification

The 3 months correlation between ArcelorMittal and Synalloy is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA and Synalloy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synalloy and ArcelorMittal 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 SA are associated (or correlated) with Synalloy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synalloy has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Synalloy go up and down completely randomly.

Pair Corralation between ArcelorMittal and Synalloy

Assuming the 90 days horizon ArcelorMittal is expected to generate 3.36 times less return on investment than Synalloy. But when comparing it to its historical volatility, ArcelorMittal SA is 1.99 times less risky than Synalloy. It trades about 0.06 of its potential returns per unit of risk. Synalloy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,088  in Synalloy on September 28, 2024 and sell it today you would earn a total of  48.00  from holding Synalloy or generate 4.41% return on investment over 90 days.

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

ArcelorMittal SA  vs.  Synalloy

ArcelorMittal SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, ArcelorMittal reported solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain basic indicators, Synalloy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ArcelorMittal and Synalloy

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

The idea behind ArcelorMittal SA and Synalloy 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.