Correlation Between ArcelorMittal and RCI Hospitality

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

Diversification Opportunities for ArcelorMittal and RCI Hospitality

0.37

Correlation Coefficient

ArcelorMittal  RCI Hospitality

Weak diversification

The 3 months correlation between ArcelorMittal and RCI is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and RCI Hospitality Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCI Hospitality Holdings 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 RCI Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCI Hospitality Holdings has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and RCI Hospitality go up and down completely randomly.

Pair Corralation between ArcelorMittal and RCI Hospitality

Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to generate 0.76 times more return on investment than RCI Hospitality. However, ArcelorMittal SA ADR is 1.32 times less risky than RCI Hospitality. It trades about -0.02 of its potential returns per unit of risk. RCI Hospitality Holdings is currently generating about -0.03 per unit of risk. If you would invest  2,809  in ArcelorMittal SA ADR on September 17, 2024 and sell it today you would lose (338.00) from holding ArcelorMittal SA ADR or give up 12.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

ArcelorMittal SA ADR  vs.  RCI Hospitality Holdings

ArcelorMittal SA ADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, ArcelorMittal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

RCI Hospitality Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, RCI Hospitality disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ArcelorMittal and RCI Hospitality

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

The idea behind ArcelorMittal SA ADR and RCI Hospitality Holdings 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.