Correlation Between Tokyu Construction and ArcelorMittal

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

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

Diversification Opportunities for Tokyu Construction and ArcelorMittal

-0.12

Correlation Coefficient

Tokyu Construction  ArcelorMittal

Good diversification

The 3 months correlation between Tokyu and ArcelorMittal is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Tokyu Construction Co and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA and Tokyu Construction 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 Tokyu Construction Co 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 Tokyu Construction i.e., Tokyu Construction and ArcelorMittal go up and down completely randomly.

Pair Corralation between Tokyu Construction and ArcelorMittal

Assuming the 90 days horizon Tokyu Construction is expected to generate 1.14 times less return on investment than ArcelorMittal. But when comparing it to its historical volatility, Tokyu Construction Co is 2.34 times less risky than ArcelorMittal. It trades about 0.07 of its potential returns per unit of risk. ArcelorMittal SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,213  in ArcelorMittal SA on October 25, 2024 and sell it today you would earn a total of  19.00  from holding ArcelorMittal SA or generate 0.86% return on investment over 90 days.

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

Tokyu Construction Co  vs.  ArcelorMittal SA

Tokyu Construction

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyu Construction Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tokyu Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ArcelorMittal SA

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ArcelorMittal is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tokyu Construction and ArcelorMittal

The main advantage of trading using opposite Tokyu Construction and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tokyu Construction 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 Tokyu Construction Co 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.