Correlation Between Universal Stainless and ArcelorMittal

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

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

Diversification Opportunities for Universal Stainless and ArcelorMittal

0.44

Correlation Coefficient

Universal Stainless  ArcelorMittal

Very weak diversification

The 3 months correlation between Universal and ArcelorMittal is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Universal Stainless Alloy and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA and Universal Stainless 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 Universal Stainless Alloy 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 Universal Stainless i.e., Universal Stainless and ArcelorMittal go up and down completely randomly.

Pair Corralation between Universal Stainless and ArcelorMittal

Given the investment horizon of 90 days Universal Stainless is expected to generate 1.72 times less return on investment than ArcelorMittal. But when comparing it to its historical volatility, Universal Stainless Alloy is 2.25 times less risky than ArcelorMittal. It trades about 0.16 of its potential returns per unit of risk. ArcelorMittal SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,260  in ArcelorMittal SA on October 15, 2024 and sell it today you would earn a total of  279.00  from holding ArcelorMittal SA or generate 12.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.16%
Values	Daily Returns

Universal Stainless Alloy  vs.  ArcelorMittal SA

Universal Stainless Alloy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Stainless Alloy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Universal Stainless may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 weak basic indicators, ArcelorMittal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Stainless and ArcelorMittal

The main advantage of trading using opposite Universal Stainless and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Stainless 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 Universal Stainless Alloy 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.