Correlation Between ArcelorMittal and Companhia Siderurgica

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

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

Diversification Opportunities for ArcelorMittal and Companhia Siderurgica

-0.72

Correlation Coefficient

ArcelorMittal  Companhia Siderurgica

Pay attention - limited upside

The 3 months correlation between ArcelorMittal and Companhia is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA and Companhia Siderurgica Nacional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Siderurgica 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 Companhia Siderurgica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Siderurgica has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Companhia Siderurgica go up and down completely randomly.

Pair Corralation between ArcelorMittal and Companhia Siderurgica

Assuming the 90 days horizon ArcelorMittal SA is expected to generate 0.75 times more return on investment than Companhia Siderurgica. However, ArcelorMittal SA is 1.34 times less risky than Companhia Siderurgica. It trades about 0.0 of its potential returns per unit of risk. Companhia Siderurgica Nacional is currently generating about -0.03 per unit of risk. If you would invest  2,788  in ArcelorMittal SA on September 30, 2024 and sell it today you would lose (249.00) from holding ArcelorMittal SA or give up 8.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	67.61%
Values	Daily Returns

ArcelorMittal SA  vs.  Companhia Siderurgica Nacional

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.

Companhia Siderurgica

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ArcelorMittal and Companhia Siderurgica

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

The idea behind ArcelorMittal SA and Companhia Siderurgica Nacional 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.