Correlation Between FARM 51 and ArcelorMittal

Can any of the company-specific risk be diversified away by investing in both FARM 51 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 FARM 51 and ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FARM 51 GROUP and ArcelorMittal, you can compare the effects of market volatilities on FARM 51 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 FARM 51 with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARM 51 and ArcelorMittal.

Diversification Opportunities for FARM 51 and ArcelorMittal

-0.39

Correlation Coefficient

FARM 51  ArcelorMittal

Very good diversification

The 3 months correlation between FARM and ArcelorMittal is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding FARM 51 GROUP and ArcelorMittal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal and FARM 51 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 FARM 51 GROUP 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 FARM 51 i.e., FARM 51 and ArcelorMittal go up and down completely randomly.

Pair Corralation between FARM 51 and ArcelorMittal

Assuming the 90 days horizon FARM 51 GROUP is expected to under-perform the ArcelorMittal. In addition to that, FARM 51 is 1.21 times more volatile than ArcelorMittal. It trades about -0.01 of its total potential returns per unit of risk. ArcelorMittal is currently generating about -0.01 per unit of volatility. If you would invest  2,237  in ArcelorMittal on October 6, 2024 and sell it today you would lose (37.00) from holding ArcelorMittal or give up 1.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

FARM 51 GROUP  vs.  ArcelorMittal

FARM 51 GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FARM 51 GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FARM 51 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with FARM 51 and ArcelorMittal

The main advantage of trading using opposite FARM 51 and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARM 51 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 FARM 51 GROUP 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.