Correlation Between Kap Industrial and ArcelorMittal South

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

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

Diversification Opportunities for Kap Industrial and ArcelorMittal South

0.25

Correlation Coefficient

Kap Industrial  ArcelorMittal South

Modest diversification

The 3 months correlation between Kap and ArcelorMittal is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and ArcelorMittal South Africa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal South and Kap Industrial 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 Kap Industrial Holdings are associated (or correlated) with ArcelorMittal South. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal South has no effect on the direction of Kap Industrial i.e., Kap Industrial and ArcelorMittal South go up and down completely randomly.

Pair Corralation between Kap Industrial and ArcelorMittal South

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to under-perform the ArcelorMittal South. But the stock apears to be less risky and, when comparing its historical volatility, Kap Industrial Holdings is 2.52 times less risky than ArcelorMittal South. The stock trades about -0.06 of its potential returns per unit of risk. The ArcelorMittal South Africa is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  13,200  in ArcelorMittal South Africa on December 24, 2024 and sell it today you would earn a total of  100.00  from holding ArcelorMittal South Africa or generate 0.76% return on investment over 90 days.

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

Kap Industrial Holdings  vs.  ArcelorMittal South Africa

Kap Industrial Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kap Industrial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

ArcelorMittal South

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal South Africa are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, ArcelorMittal South exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kap Industrial and ArcelorMittal South

The main advantage of trading using opposite Kap Industrial and ArcelorMittal South positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kap Industrial position performs unexpectedly, ArcelorMittal South 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 South will offset losses from the drop in ArcelorMittal South's long position.

The idea behind Kap Industrial Holdings and ArcelorMittal South Africa 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.