Correlation Between ArcelorMittal and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both ArcelorMittal and Johnson Johnson 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 Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ArcelorMittal SA and Johnson Johnson, you can compare the effects of market volatilities on ArcelorMittal and Johnson Johnson 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 Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcelorMittal and Johnson Johnson.
Diversification Opportunities for ArcelorMittal and Johnson Johnson
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ArcelorMittal and Johnson is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson 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 Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Johnson Johnson go up and down completely randomly.
Pair Corralation between ArcelorMittal and Johnson Johnson
Assuming the 90 days trading horizon ArcelorMittal SA is expected to under-perform the Johnson Johnson. In addition to that, ArcelorMittal is 2.07 times more volatile than Johnson Johnson. It trades about -0.1 of its total potential returns per unit of risk. Johnson Johnson is currently generating about -0.04 per unit of volatility. If you would invest 5,160 in Johnson Johnson on January 26, 2024 and sell it today you would lose (48.00) from holding Johnson Johnson or give up 0.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ArcelorMittal SA vs. Johnson Johnson
Performance |
| Timeline |
| ArcelorMittal SA |
| Johnson Johnson |
ArcelorMittal and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ArcelorMittal and Johnson Johnson
The main advantage of trading using opposite ArcelorMittal and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ArcelorMittal position performs unexpectedly, Johnson Johnson 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 Johnson Johnson will offset losses from the drop in Johnson Johnson's long position.| ArcelorMittal vs. Companhia Siderrgica Nacional | ArcelorMittal vs. Metalurgica Gerdau SA | ArcelorMittal vs. Usinas Siderrgicas de | ArcelorMittal vs. Cia de Ferro |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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