Correlation Between ArcelorMittal and Skillful Craftsman

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

Diversification Opportunities for ArcelorMittal and Skillful Craftsman

0.36

Correlation Coefficient

ArcelorMittal  Skillful Craftsman

Weak diversification

The 3 months correlation between ArcelorMittal and Skillful is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and Skillful Craftsman Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skillful Craftsman 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 Skillful Craftsman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skillful Craftsman has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Skillful Craftsman go up and down completely randomly.

Pair Corralation between ArcelorMittal and Skillful Craftsman

Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to under-perform the Skillful Craftsman. But the stock apears to be less risky and, when comparing its historical volatility, ArcelorMittal SA ADR is 2.05 times less risky than Skillful Craftsman. The stock trades about -0.19 of its potential returns per unit of risk. The Skillful Craftsman Education is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  104.00  in Skillful Craftsman Education on September 25, 2024 and sell it today you would lose (7.00) from holding Skillful Craftsman Education or give up 6.73% 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.  Skillful Craftsman Education

ArcelorMittal SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ArcelorMittal SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Skillful Craftsman

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skillful Craftsman Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Skillful Craftsman is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ArcelorMittal and Skillful Craftsman

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

The idea behind ArcelorMittal SA ADR and Skillful Craftsman Education 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.