Correlation Between BlueScope Steel and ArcelorMittal

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

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

Diversification Opportunities for BlueScope Steel and ArcelorMittal

-0.45

Correlation Coefficient

BlueScope Steel  ArcelorMittal

Very good diversification

The 3 months correlation between BlueScope and ArcelorMittal is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Ltd and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA and BlueScope Steel 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 BlueScope Steel Ltd 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 BlueScope Steel i.e., BlueScope Steel and ArcelorMittal go up and down completely randomly.

Pair Corralation between BlueScope Steel and ArcelorMittal

Assuming the 90 days horizon BlueScope Steel Ltd is expected to under-perform the ArcelorMittal. In addition to that, BlueScope Steel is 2.91 times more volatile than ArcelorMittal SA. It trades about -0.18 of its total potential returns per unit of risk. ArcelorMittal SA is currently generating about 0.06 per unit of volatility. If you would invest  2,506  in ArcelorMittal SA on September 27, 2024 and sell it today you would earn a total of  33.00  from holding ArcelorMittal SA or generate 1.32% return on investment over 90 days.

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

BlueScope Steel Ltd  vs.  ArcelorMittal SA

BlueScope Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlueScope Steel Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, BlueScope Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ArcelorMittal SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, ArcelorMittal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlueScope Steel and ArcelorMittal

The main advantage of trading using opposite BlueScope Steel and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel 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 BlueScope Steel Ltd 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.