Correlation Between Grupo Simec and ArcelorMittal

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

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

Diversification Opportunities for Grupo Simec and ArcelorMittal

-0.07

Correlation Coefficient

Grupo Simec  ArcelorMittal

Good diversification

The 3 months correlation between Grupo and ArcelorMittal is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Simec SAB 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 Grupo Simec 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 Grupo Simec SAB 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 Grupo Simec i.e., Grupo Simec and ArcelorMittal go up and down completely randomly.

Pair Corralation between Grupo Simec and ArcelorMittal

Considering the 90-day investment horizon Grupo Simec SAB is expected to under-perform the ArcelorMittal. In addition to that, Grupo Simec is 1.46 times more volatile than ArcelorMittal SA ADR. It trades about -0.02 of its total potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about 0.02 per unit of volatility. If you would invest  2,413  in ArcelorMittal SA ADR on September 19, 2024 and sell it today you would earn a total of  40.00  from holding ArcelorMittal SA ADR or generate 1.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.89%
Values	Daily Returns

Grupo Simec SAB  vs.  ArcelorMittal SA ADR

Grupo Simec SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Simec SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Grupo Simec is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

ArcelorMittal SA ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Grupo Simec and ArcelorMittal

The main advantage of trading using opposite Grupo Simec and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Simec 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 Grupo Simec SAB 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.