Correlation Between ArcelorMittal and Kingdee International

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

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

Diversification Opportunities for ArcelorMittal and Kingdee International

0.29

Correlation Coefficient

ArcelorMittal  Kingdee International

Modest diversification

The 3 months correlation between ArcelorMittal and Kingdee is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA and Kingdee International Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingdee International 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 Kingdee International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingdee International has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Kingdee International go up and down completely randomly.

Pair Corralation between ArcelorMittal and Kingdee International

Assuming the 90 days trading horizon ArcelorMittal SA is expected to generate 0.47 times more return on investment than Kingdee International. However, ArcelorMittal SA is 2.15 times less risky than Kingdee International. It trades about -0.02 of its potential returns per unit of risk. Kingdee International Software is currently generating about -0.06 per unit of risk. If you would invest  2,293  in ArcelorMittal SA on October 5, 2024 and sell it today you would lose (80.00) from holding ArcelorMittal SA or give up 3.49% of portfolio value over 90 days.

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

ArcelorMittal SA  vs.  Kingdee International Software

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.

Kingdee International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingdee International Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ArcelorMittal and Kingdee International

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

The idea behind ArcelorMittal SA and Kingdee International Software 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.