Correlation Between APPLIED MATERIALS and ArcelorMittal

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

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

Diversification Opportunities for APPLIED MATERIALS and ArcelorMittal

-0.12

Correlation Coefficient

APPLIED MATERIALS  ArcelorMittal

Good diversification

The 3 months correlation between APPLIED and ArcelorMittal is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA and APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS i.e., APPLIED MATERIALS and ArcelorMittal go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and ArcelorMittal

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.19 times more return on investment than ArcelorMittal. However, APPLIED MATERIALS is 1.19 times more volatile than ArcelorMittal SA. It trades about 0.08 of its potential returns per unit of risk. ArcelorMittal SA is currently generating about 0.05 per unit of risk. If you would invest  17,289  in APPLIED MATERIALS on October 25, 2024 and sell it today you would earn a total of  1,829  from holding APPLIED MATERIALS or generate 10.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

APPLIED MATERIALS  vs.  ArcelorMittal SA

APPLIED MATERIALS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in APPLIED MATERIALS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, APPLIED MATERIALS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ArcelorMittal SA

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ArcelorMittal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with APPLIED MATERIALS and ArcelorMittal

The main advantage of trading using opposite APPLIED MATERIALS and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS 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 APPLIED MATERIALS 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.