Correlation Between ArcelorMittal and Sif Holding

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

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

Diversification Opportunities for ArcelorMittal and Sif Holding

0.5

Correlation Coefficient

ArcelorMittal  Sif Holding

Very weak diversification

The 3 months correlation between ArcelorMittal and Sif is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA and Sif Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sif Holding NV and ArcelorMittal 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 ArcelorMittal SA are associated (or correlated) with Sif Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sif Holding NV has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Sif Holding go up and down completely randomly.

Pair Corralation between ArcelorMittal and Sif Holding

Assuming the 90 days horizon ArcelorMittal SA is expected to generate 0.64 times more return on investment than Sif Holding. However, ArcelorMittal SA is 1.57 times less risky than Sif Holding. It trades about 0.06 of its potential returns per unit of risk. Sif Holding NV is currently generating about 0.03 per unit of risk. If you would invest  2,341  in ArcelorMittal SA on February 24, 2024 and sell it today you would earn a total of  33.00  from holding ArcelorMittal SA or generate 1.41% return on investment over 90 days.

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

ArcelorMittal SA  vs.  Sif Holding NV

ArcelorMittal SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ArcelorMittal SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ArcelorMittal is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Sif Holding NV

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sif Holding NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sif Holding is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ArcelorMittal and Sif Holding

The main advantage of trading using opposite ArcelorMittal and Sif Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ArcelorMittal position performs unexpectedly, Sif Holding 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 Sif Holding will offset losses from the drop in Sif Holding's long position.

The idea behind ArcelorMittal SA and Sif Holding NV 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..