Correlation Between ArcelorMittal and Fortress Transp

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

Diversification Opportunities for ArcelorMittal and Fortress Transp

0.34

Correlation Coefficient

ArcelorMittal  Fortress Transp

Weak diversification

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

Pair Corralation between ArcelorMittal and Fortress Transp

Allowing for the 90-day total investment horizon ArcelorMittal is expected to generate 5.05 times less return on investment than Fortress Transp. But when comparing it to its historical volatility, ArcelorMittal SA ADR is 1.58 times less risky than Fortress Transp. It trades about 0.02 of its potential returns per unit of risk. Fortress Transp Infra is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10,450  in Fortress Transp Infra on September 29, 2024 and sell it today you would earn a total of  2,261  from holding Fortress Transp Infra or generate 21.64% return on investment over 90 days.

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

ArcelorMittal SA ADR  vs.  Fortress Transp Infra

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 latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Fortress Transp Infra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortress Transp Infra has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Fortress Transp is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ArcelorMittal and Fortress Transp

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

The idea behind ArcelorMittal SA ADR and Fortress Transp Infra 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.