Correlation Between China Resources and ArcelorMittal

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

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

Diversification Opportunities for China Resources and ArcelorMittal

0.62

Correlation Coefficient

China Resources  ArcelorMittal

Poor diversification

The 3 months correlation between China and ArcelorMittal is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA and China Resources 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 China Resources Beer 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 China Resources i.e., China Resources and ArcelorMittal go up and down completely randomly.

Pair Corralation between China Resources and ArcelorMittal

Assuming the 90 days horizon China Resources is expected to generate 2.71 times less return on investment than ArcelorMittal. But when comparing it to its historical volatility, China Resources Beer is 1.15 times less risky than ArcelorMittal. It trades about 0.07 of its potential returns per unit of risk. 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 24, 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

China Resources Beer  vs.  ArcelorMittal SA

China Resources Beer

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 China Resources and ArcelorMittal

The main advantage of trading using opposite China Resources and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources 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 China Resources Beer 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.