Correlation Between ArcelorMittal and Salzgitter

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

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

Diversification Opportunities for ArcelorMittal and Salzgitter

0.09

Correlation Coefficient

ArcelorMittal  Salzgitter

Significant diversification

The 3 months correlation between ArcelorMittal and Salzgitter is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA and Salzgitter AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salzgitter AG ADR 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 Salzgitter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salzgitter AG ADR has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Salzgitter go up and down completely randomly.

Pair Corralation between ArcelorMittal and Salzgitter

Assuming the 90 days horizon ArcelorMittal SA is expected to generate 0.53 times more return on investment than Salzgitter. However, ArcelorMittal SA is 1.88 times less risky than Salzgitter. It trades about 0.06 of its potential returns per unit of risk. Salzgitter AG ADR is currently generating about -0.23 per unit of risk. If you would invest  2,506  in ArcelorMittal SA on September 28, 2024 and sell it today you would earn a total of  33.00  from holding ArcelorMittal SA or generate 1.32% return on investment over 90 days.

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

ArcelorMittal SA  vs.  Salzgitter AG ADR

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.

Salzgitter AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salzgitter AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Salzgitter is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ArcelorMittal and Salzgitter

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

The idea behind ArcelorMittal SA and Salzgitter AG ADR 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.