Correlation Between Reinet Investments and ArcelorMittal South

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

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

Diversification Opportunities for Reinet Investments and ArcelorMittal South

0.06

Correlation Coefficient

Reinet Investments  ArcelorMittal South

Significant diversification

The 3 months correlation between Reinet and ArcelorMittal is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Reinet Investments SCA and ArcelorMittal South Africa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal South and Reinet Investments 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 Reinet Investments SCA are associated (or correlated) with ArcelorMittal South. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal South has no effect on the direction of Reinet Investments i.e., Reinet Investments and ArcelorMittal South go up and down completely randomly.

Pair Corralation between Reinet Investments and ArcelorMittal South

Assuming the 90 days trading horizon Reinet Investments SCA is expected to under-perform the ArcelorMittal South. But the stock apears to be less risky and, when comparing its historical volatility, Reinet Investments SCA is 6.66 times less risky than ArcelorMittal South. The stock trades about -0.25 of its potential returns per unit of risk. The ArcelorMittal South Africa is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  13,500  in ArcelorMittal South Africa on October 12, 2024 and sell it today you would lose (700.00) from holding ArcelorMittal South Africa or give up 5.19% of portfolio value over 90 days.

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

Reinet Investments SCA  vs.  ArcelorMittal South Africa

Reinet Investments SCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reinet Investments SCA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Reinet Investments is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ArcelorMittal South

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ArcelorMittal South Africa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Reinet Investments and ArcelorMittal South

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

The idea behind Reinet Investments SCA and ArcelorMittal South Africa 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.