Correlation Between Scholastic and ArcelorMittal
Can any of the company-specific risk be diversified away by investing in both Scholastic 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 Scholastic and ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scholastic and ArcelorMittal SA ADR, you can compare the effects of market volatilities on Scholastic 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 Scholastic with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scholastic and ArcelorMittal.
Diversification Opportunities for Scholastic and ArcelorMittal
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Scholastic and ArcelorMittal is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Scholastic 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 Scholastic 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 Scholastic 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 Scholastic i.e., Scholastic and ArcelorMittal go up and down completely randomly.
Pair Corralation between Scholastic and ArcelorMittal
Given the investment horizon of 90 days Scholastic is expected to under-perform the ArcelorMittal. In addition to that, Scholastic is 2.65 times more volatile than ArcelorMittal SA ADR. It trades about -0.19 of its total potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about -0.16 per unit of volatility. If you would invest 2,486 in ArcelorMittal SA ADR on September 25, 2024 and sell it today you would lose (161.00) from holding ArcelorMittal SA ADR or give up 6.48% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Scholastic vs. ArcelorMittal SA ADR
Performance |
Timeline |
Scholastic |
ArcelorMittal SA ADR |
Scholastic and ArcelorMittal Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Scholastic and ArcelorMittal
The main advantage of trading using opposite Scholastic and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scholastic 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 Scholastic 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.ArcelorMittal vs. Olympic Steel | ArcelorMittal vs. Ternium SA ADR | ArcelorMittal vs. Gerdau SA ADR | ArcelorMittal vs. POSCO Holdings |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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