Correlation Between ArcelorMittal and Forsys Metals

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

Diversification Opportunities for ArcelorMittal and Forsys Metals

0.34

Correlation Coefficient

ArcelorMittal  Forsys Metals

Weak diversification

The 3 months correlation between ArcelorMittal and Forsys is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and Forsys Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forsys Metals Corp 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 Forsys Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forsys Metals Corp has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Forsys Metals go up and down completely randomly.

Pair Corralation between ArcelorMittal and Forsys Metals

Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to generate 0.88 times more return on investment than Forsys Metals. However, ArcelorMittal SA ADR is 1.14 times less risky than Forsys Metals. It trades about -0.11 of its potential returns per unit of risk. Forsys Metals Corp is currently generating about -0.2 per unit of risk. If you would invest  2,556  in ArcelorMittal SA ADR on September 19, 2024 and sell it today you would lose (103.00) from holding ArcelorMittal SA ADR or give up 4.03% 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.  Forsys Metals Corp

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.

Forsys Metals Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Forsys Metals Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Forsys Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ArcelorMittal and Forsys Metals

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

The idea behind ArcelorMittal SA ADR and Forsys Metals Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..