Correlation Between Companhia Siderurgica and ArcelorMittal

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

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

Diversification Opportunities for Companhia Siderurgica and ArcelorMittal

-0.73

Correlation Coefficient

Companhia Siderurgica  ArcelorMittal

Pay attention - limited upside

The 3 months correlation between Companhia and ArcelorMittal is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Siderurgica Nacional and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA and Companhia Siderurgica 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 Companhia Siderurgica Nacional 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 has no effect on the direction of Companhia Siderurgica i.e., Companhia Siderurgica and ArcelorMittal go up and down completely randomly.

Pair Corralation between Companhia Siderurgica and ArcelorMittal

Considering the 90-day investment horizon Companhia Siderurgica Nacional is expected to under-perform the ArcelorMittal. In addition to that, Companhia Siderurgica is 1.33 times more volatile than ArcelorMittal SA. It trades about -0.03 of its total potential returns per unit of risk. ArcelorMittal SA is currently generating about 0.0 per unit of volatility. If you would invest  2,788  in ArcelorMittal SA on September 28, 2024 and sell it today you would lose (249.00) from holding ArcelorMittal SA or give up 8.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	67.47%
Values	Daily Returns

Companhia Siderurgica Nacional  vs.  ArcelorMittal SA

Companhia Siderurgica

Risk-Adjusted Performance

0 of 100

Very Weak

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

ArcelorMittal SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, ArcelorMittal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Companhia Siderurgica and ArcelorMittal

The main advantage of trading using opposite Companhia Siderurgica and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Siderurgica 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 Companhia Siderurgica Nacional and ArcelorMittal SA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.