Correlation Between ArcelorMittal and CVB Financial

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

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

Diversification Opportunities for ArcelorMittal and CVB Financial

0.53

Correlation Coefficient

ArcelorMittal  CVB Financial

Very weak diversification

The 3 months correlation between ArcelorMittal and CVB is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA and CVB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVB Financial Corp 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 CVB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVB Financial Corp has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and CVB Financial go up and down completely randomly.

Pair Corralation between ArcelorMittal and CVB Financial

Assuming the 90 days trading horizon ArcelorMittal SA is expected to under-perform the CVB Financial. But the stock apears to be less risky and, when comparing its historical volatility, ArcelorMittal SA is 1.41 times less risky than CVB Financial. The stock trades about -0.62 of its potential returns per unit of risk. The CVB Financial Corp is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  2,159  in CVB Financial Corp on October 11, 2024 and sell it today you would lose (139.00) from holding CVB Financial Corp or give up 6.44% of portfolio value over 90 days.

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

ArcelorMittal SA  vs.  CVB Financial Corp

ArcelorMittal SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ArcelorMittal SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ArcelorMittal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CVB Financial Corp

Risk-Adjusted Performance

10 of 100

Good

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

Pair Trading with ArcelorMittal and CVB Financial

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

The idea behind ArcelorMittal SA and CVB Financial Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.