Correlation Between ArcelorMittal and Charter Communications

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

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

Diversification Opportunities for ArcelorMittal and Charter Communications

0.68

Correlation Coefficient

ArcelorMittal  Charter Communications

Poor diversification

The 3 months correlation between ArcelorMittal and Charter is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications 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 are associated (or correlated) with Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Charter Communications go up and down completely randomly.

Pair Corralation between ArcelorMittal and Charter Communications

Assuming the 90 days trading horizon ArcelorMittal is expected to generate 0.74 times more return on investment than Charter Communications. However, ArcelorMittal is 1.35 times less risky than Charter Communications. It trades about 0.01 of its potential returns per unit of risk. Charter Communications is currently generating about 0.0 per unit of risk. If you would invest  2,116  in ArcelorMittal on October 11, 2024 and sell it today you would earn a total of  4.00  from holding ArcelorMittal or generate 0.19% return on investment over 90 days.

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

ArcelorMittal  vs.  Charter Communications

ArcelorMittal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ArcelorMittal 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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Charter Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Charter Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ArcelorMittal and Charter Communications

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

The idea behind ArcelorMittal and Charter Communications 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.