Correlation Between DALATA HOTEL and ArcelorMittal

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

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

Diversification Opportunities for DALATA HOTEL and ArcelorMittal

0.57

Correlation Coefficient

DALATA HOTEL  ArcelorMittal

Very weak diversification

The 3 months correlation between DALATA and ArcelorMittal is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding DALATA HOTEL and ArcelorMittal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal and DALATA HOTEL 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 DALATA HOTEL 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 has no effect on the direction of DALATA HOTEL i.e., DALATA HOTEL and ArcelorMittal go up and down completely randomly.

Pair Corralation between DALATA HOTEL and ArcelorMittal

Assuming the 90 days trading horizon DALATA HOTEL is expected to generate 1.51 times less return on investment than ArcelorMittal. But when comparing it to its historical volatility, DALATA HOTEL is 1.49 times less risky than ArcelorMittal. It trades about 0.15 of its potential returns per unit of risk. ArcelorMittal is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,220  in ArcelorMittal on December 26, 2024 and sell it today you would earn a total of  680.00  from holding ArcelorMittal or generate 30.63% return on investment over 90 days.

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

DALATA HOTEL  vs.  ArcelorMittal

DALATA HOTEL

Risk-Adjusted Performance

Good

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

ArcelorMittal

Risk-Adjusted Performance

Good

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

Pair Trading with DALATA HOTEL and ArcelorMittal

The main advantage of trading using opposite DALATA HOTEL and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DALATA HOTEL 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 DALATA HOTEL and ArcelorMittal 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.