Correlation Between ArcelorMittal and Aris Mining

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

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

Diversification Opportunities for ArcelorMittal and Aris Mining

0.62

Correlation Coefficient

ArcelorMittal  Aris Mining

Poor diversification

The 3 months correlation between ArcelorMittal and Aris is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and Aris Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aris Mining and ArcelorMittal 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 ArcelorMittal SA ADR are associated (or correlated) with Aris Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aris Mining has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Aris Mining go up and down completely randomly.

Pair Corralation between ArcelorMittal and Aris Mining

Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to generate 0.8 times more return on investment than Aris Mining. However, ArcelorMittal SA ADR is 1.25 times less risky than Aris Mining. It trades about 0.08 of its potential returns per unit of risk. Aris Mining is currently generating about 0.01 per unit of risk. If you would invest  2,524  in ArcelorMittal SA ADR on December 3, 2024 and sell it today you would earn a total of  250.00  from holding ArcelorMittal SA ADR or generate 9.9% return on investment over 90 days.

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

ArcelorMittal SA ADR  vs.  Aris Mining

ArcelorMittal SA ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA ADR are ranked lower than 6 (%) 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 April 2025.

Aris Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aris Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Aris Mining is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ArcelorMittal and Aris Mining

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

The idea behind ArcelorMittal SA ADR and Aris Mining 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.