Correlation Between Nuvalent and ArcelorMittal

Can any of the company-specific risk be diversified away by investing in both Nuvalent and ArcelorMittal 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 Nuvalent and ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nuvalent and ArcelorMittal SA ADR, you can compare the effects of market volatilities on Nuvalent and ArcelorMittal 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 Nuvalent with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuvalent and ArcelorMittal.

Diversification Opportunities for Nuvalent and ArcelorMittal

-0.03

Correlation Coefficient

Nuvalent  ArcelorMittal

Good diversification

The 3 months correlation between Nuvalent and ArcelorMittal is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and ArcelorMittal SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA ADR and Nuvalent 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 Nuvalent are associated (or correlated) with ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA ADR has no effect on the direction of Nuvalent i.e., Nuvalent and ArcelorMittal go up and down completely randomly.

Pair Corralation between Nuvalent and ArcelorMittal

Given the investment horizon of 90 days Nuvalent is expected to generate 1.73 times more return on investment than ArcelorMittal. However, Nuvalent is 1.73 times more volatile than ArcelorMittal SA ADR. It trades about 0.05 of its potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about 0.0 per unit of risk. If you would invest  6,402  in Nuvalent on September 21, 2024 and sell it today you would earn a total of  2,062  from holding Nuvalent or generate 32.21% return on investment over 90 days.

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

Nuvalent  vs.  ArcelorMittal SA ADR

Nuvalent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuvalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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.

Pair Trading with Nuvalent and ArcelorMittal

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

The idea behind Nuvalent and ArcelorMittal SA ADR 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.