Correlation Between ArcelorMittal and USU Software

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

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

Diversification Opportunities for ArcelorMittal and USU Software

0.49

Correlation Coefficient

ArcelorMittal  USU Software

Very weak diversification

The 3 months correlation between ArcelorMittal and USU is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA and USU Software AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USU Software AG 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 USU Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USU Software AG has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and USU Software go up and down completely randomly.

Pair Corralation between ArcelorMittal and USU Software

Assuming the 90 days trading horizon ArcelorMittal SA is expected to under-perform the USU Software. In addition to that, ArcelorMittal is 1.09 times more volatile than USU Software AG. It trades about -0.21 of its total potential returns per unit of risk. USU Software AG is currently generating about -0.16 per unit of volatility. If you would invest  2,230  in USU Software AG on October 5, 2024 and sell it today you would lose (80.00) from holding USU Software AG or give up 3.59% 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.  USU Software AG

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.

USU Software AG

Risk-Adjusted Performance

0 of 100

Insignificant

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

Pair Trading with ArcelorMittal and USU Software

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

The idea behind ArcelorMittal SA and USU Software AG 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.