Correlation Between GoldMining and ArcelorMittal

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

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

Diversification Opportunities for GoldMining and ArcelorMittal

-0.54

Correlation Coefficient

GoldMining  ArcelorMittal

Excellent diversification

The 3 months correlation between GoldMining and ArcelorMittal is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining and ArcelorMittal SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA ADR and GoldMining 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 GoldMining 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 ADR has no effect on the direction of GoldMining i.e., GoldMining and ArcelorMittal go up and down completely randomly.

Pair Corralation between GoldMining and ArcelorMittal

Given the investment horizon of 90 days GoldMining is expected to under-perform the ArcelorMittal. In addition to that, GoldMining is 1.25 times more volatile than ArcelorMittal SA ADR. It trades about -0.11 of its total potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about 0.08 per unit of volatility. If you would invest  2,264  in ArcelorMittal SA ADR on September 16, 2024 and sell it today you would earn a total of  207.00  from holding ArcelorMittal SA ADR or generate 9.14% return on investment over 90 days.

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

GoldMining  vs.  ArcelorMittal SA ADR

GoldMining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoldMining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ArcelorMittal SA ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, ArcelorMittal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GoldMining and ArcelorMittal

The main advantage of trading using opposite GoldMining and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GoldMining 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 GoldMining and ArcelorMittal SA ADR 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.