Correlation Between ArcelorMittal and Worthington Steel

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

Diversification Opportunities for ArcelorMittal and Worthington Steel

0.6

Correlation Coefficient

ArcelorMittal  Worthington Steel

Poor diversification

The 3 months correlation between ArcelorMittal and Worthington is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and Worthington Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worthington Steel 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 Worthington Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worthington Steel has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Worthington Steel go up and down completely randomly.

Pair Corralation between ArcelorMittal and Worthington Steel

Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to under-perform the Worthington Steel. But the stock apears to be less risky and, when comparing its historical volatility, ArcelorMittal SA ADR is 1.92 times less risky than Worthington Steel. The stock trades about -0.08 of its potential returns per unit of risk. The Worthington Steel is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,338  in Worthington Steel on October 5, 2024 and sell it today you would lose (198.00) from holding Worthington Steel or give up 5.93% of portfolio value over 90 days.

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

ArcelorMittal SA ADR  vs.  Worthington Steel

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.

Worthington Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Worthington Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Worthington Steel is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ArcelorMittal and Worthington Steel

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

The idea behind ArcelorMittal SA ADR and Worthington Steel 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.