Correlation Between BC IRON and ArcelorMittal

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

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

Diversification Opportunities for BC IRON and ArcelorMittal

-0.75

Correlation Coefficient

BC IRON  ArcelorMittal

Pay attention - limited upside

The 3 months correlation between BC3 and ArcelorMittal is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding BC IRON and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA and BC IRON 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 BC IRON 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 BC IRON i.e., BC IRON and ArcelorMittal go up and down completely randomly.

Pair Corralation between BC IRON and ArcelorMittal

Assuming the 90 days trading horizon BC IRON is expected to under-perform the ArcelorMittal. But the stock apears to be less risky and, when comparing its historical volatility, BC IRON is 1.38 times less risky than ArcelorMittal. The stock trades about -0.09 of its potential returns per unit of risk. The ArcelorMittal SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,213  in ArcelorMittal SA on December 25, 2024 and sell it today you would earn a total of  691.00  from holding ArcelorMittal SA or generate 31.22% return on investment over 90 days.

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

BC IRON  vs.  ArcelorMittal SA

BC IRON

Risk-Adjusted Performance

Very Weak

Over the last 90 days BC IRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ArcelorMittal SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ArcelorMittal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BC IRON and ArcelorMittal

The main advantage of trading using opposite BC IRON and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BC IRON 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 BC IRON 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.