Correlation Between ArcelorMittal and Four Seasons

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

Diversification Opportunities for ArcelorMittal and Four Seasons

0.01

Correlation Coefficient

ArcelorMittal  Four Seasons

Significant diversification

The 3 months correlation between ArcelorMittal and Four is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and Four Seasons Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Four Seasons Education 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 Four Seasons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Four Seasons Education has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Four Seasons go up and down completely randomly.

Pair Corralation between ArcelorMittal and Four Seasons

Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to under-perform the Four Seasons. But the stock apears to be less risky and, when comparing its historical volatility, ArcelorMittal SA ADR is 1.3 times less risky than Four Seasons. The stock trades about -0.16 of its potential returns per unit of risk. The Four Seasons Education is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,091  in Four Seasons Education on September 25, 2024 and sell it today you would lose (51.00) from holding Four Seasons Education or give up 4.67% of portfolio value over 90 days.

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

ArcelorMittal SA ADR  vs.  Four Seasons 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.

Four Seasons Education

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ArcelorMittal and Four Seasons

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

The idea behind ArcelorMittal SA ADR and Four Seasons 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.