diversifiable risk of combining ARCELORMITTAL and 00108WAF7 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARCELORMITTAL LUXEMBOURG 675 and AEP TEX INC, you can compare the effects of market volatilities on ARCELORMITTAL and 00108WAF7 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 00108WAF7. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARCELORMITTAL and 00108WAF7.
Diversification Opportunities for ARCELORMITTAL and 00108WAF7
Pair Corralation between ARCELORMITTAL and 00108WAF7
Assuming the 90 days trading horizon ARCELORMITTAL LUXEMBOURG 675 is expected to under-perform the 00108WAF7. In addition to that, ARCELORMITTAL is 1.29 times more volatile than AEP TEX INC. It trades about -0.02 of its total potential returns per unit of risk. AEP TEX INC is currently generating about 0.07 per unit of volatility. If you would invest 7,377 in AEP TEX INC on November 30, 2023 and sell it today you would earn a total of 103.00 from holding AEP TEX INC or generate 1.4% return on investment over 90 days.
ARCELORMITTAL LUXEMBOURG 6.75% vs. AEP TEX INC 3.8% 01Oct2047
ARCELORMITTAL and 00108WAF7 Volatility Contrast
Pair Trading with ARCELORMITTAL and 00108WAF7The main advantage of trading using opposite ARCELORMITTAL and 00108WAF7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARCELORMITTAL position performs unexpectedly, 00108WAF7 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 00108WAF7 will offset losses from the drop in 00108WAF7's long position. The idea behind ARCELORMITTAL LUXEMBOURG 675 and AEP TEX INC 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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