Correlation Between Lupatech and ArcelorMittal

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

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

Diversification Opportunities for Lupatech and ArcelorMittal

-0.61

Correlation Coefficient

Lupatech  ArcelorMittal

Excellent diversification

The 3 months correlation between Lupatech and ArcelorMittal is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lupatech SA and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA and Lupatech 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 Lupatech SA 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 Lupatech i.e., Lupatech and ArcelorMittal go up and down completely randomly.

Pair Corralation between Lupatech and ArcelorMittal

Assuming the 90 days trading horizon Lupatech SA is expected to under-perform the ArcelorMittal. In addition to that, Lupatech is 1.2 times more volatile than ArcelorMittal SA. It trades about -0.04 of its total potential returns per unit of risk. ArcelorMittal SA is currently generating about 0.17 per unit of volatility. If you would invest  6,220  in ArcelorMittal SA on September 12, 2024 and sell it today you would earn a total of  1,565  from holding ArcelorMittal SA or generate 25.16% return on investment over 90 days.

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

Lupatech SA  vs.  ArcelorMittal SA

Lupatech SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lupatech SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

ArcelorMittal SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, ArcelorMittal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lupatech and ArcelorMittal

The main advantage of trading using opposite Lupatech and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lupatech 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 Lupatech SA 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.