Correlation Between ArcelorMittal and Grupo Aeroportuario

Can any of the company-specific risk be diversified away by investing in both ArcelorMittal and Grupo Aeroportuario 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 Grupo Aeroportuario 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 Grupo Aeroportuario del, you can compare the effects of market volatilities on ArcelorMittal and Grupo Aeroportuario 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 Grupo Aeroportuario. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcelorMittal and Grupo Aeroportuario.

Diversification Opportunities for ArcelorMittal and Grupo Aeroportuario

-0.44

Correlation Coefficient

ArcelorMittal  Grupo Aeroportuario

Very good diversification

The 3 months correlation between ArcelorMittal and Grupo is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and Grupo Aeroportuario del in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Aeroportuario del 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 Grupo Aeroportuario. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Aeroportuario del has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Grupo Aeroportuario go up and down completely randomly.

Pair Corralation between ArcelorMittal and Grupo Aeroportuario

Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to under-perform the Grupo Aeroportuario. But the stock apears to be less risky and, when comparing its historical volatility, ArcelorMittal SA ADR is 1.09 times less risky than Grupo Aeroportuario. The stock trades about -0.11 of its potential returns per unit of risk. The Grupo Aeroportuario del is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  26,500  in Grupo Aeroportuario del on September 19, 2024 and sell it today you would earn a total of  863.00  from holding Grupo Aeroportuario del or generate 3.26% return on investment over 90 days.

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

ArcelorMittal SA ADR  vs.  Grupo Aeroportuario del

ArcelorMittal SA ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ArcelorMittal is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Grupo Aeroportuario del

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Aeroportuario del has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Grupo Aeroportuario is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ArcelorMittal and Grupo Aeroportuario

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

The idea behind ArcelorMittal SA ADR and Grupo Aeroportuario del 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.