Correlation Between ArcelorMittal and BlueScope Steel
Can any of the company-specific risk be diversified away by investing in both ArcelorMittal and BlueScope Steel 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 BlueScope Steel 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 BlueScope Steel Limited, you can compare the effects of market volatilities on ArcelorMittal and BlueScope Steel 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 BlueScope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcelorMittal and BlueScope Steel.
Diversification Opportunities for ArcelorMittal and BlueScope Steel
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between ArcelorMittal and BlueScope is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and BlueScope Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel 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 BlueScope Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueScope Steel has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and BlueScope Steel go up and down completely randomly.
Pair Corralation between ArcelorMittal and BlueScope Steel
Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to under-perform the BlueScope Steel. In addition to that, ArcelorMittal is 1.07 times more volatile than BlueScope Steel Limited. It trades about -0.15 of its total potential returns per unit of risk. BlueScope Steel Limited is currently generating about -0.11 per unit of volatility. If you would invest 1,310 in BlueScope Steel Limited on October 7, 2024 and sell it today you would lose (110.00) from holding BlueScope Steel Limited or give up 8.4% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
ArcelorMittal SA ADR vs. BlueScope Steel Limited
Performance |
Timeline |
ArcelorMittal SA ADR |
BlueScope Steel |
ArcelorMittal and BlueScope Steel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ArcelorMittal and BlueScope Steel
The main advantage of trading using opposite ArcelorMittal and BlueScope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ArcelorMittal position performs unexpectedly, BlueScope Steel 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 BlueScope Steel will offset losses from the drop in BlueScope Steel's long position.ArcelorMittal vs. Olympic Steel | ArcelorMittal vs. Ternium SA ADR | ArcelorMittal vs. Gerdau SA ADR | ArcelorMittal vs. POSCO Holdings |
BlueScope Steel vs. Nucor Corp | BlueScope Steel vs. United States Steel | BlueScope Steel vs. Reliance Steel Aluminum | BlueScope Steel vs. ArcelorMittal SA ADR |
Check out your portfolio center.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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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