Correlation Between Wrapped Bitcoin and ArcelorMittal

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

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

Diversification Opportunities for Wrapped Bitcoin and ArcelorMittal

-0.35

Correlation Coefficient

Wrapped Bitcoin  ArcelorMittal

Very good diversification

The 3 months correlation between Wrapped and ArcelorMittal is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped Bitcoin and ArcelorMittal SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA ADR and Wrapped Bitcoin 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 Wrapped Bitcoin 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 ADR has no effect on the direction of Wrapped Bitcoin i.e., Wrapped Bitcoin and ArcelorMittal go up and down completely randomly.

Pair Corralation between Wrapped Bitcoin and ArcelorMittal

Assuming the 90 days trading horizon Wrapped Bitcoin is expected to generate 1.36 times more return on investment than ArcelorMittal. However, Wrapped Bitcoin is 1.36 times more volatile than ArcelorMittal SA ADR. It trades about -0.05 of its potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about -0.21 per unit of risk. If you would invest  6,546,026  in Wrapped Bitcoin on January 30, 2024 and sell it today you would lose (197,351) from holding Wrapped Bitcoin or give up 3.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Wrapped Bitcoin  vs.  ArcelorMittal SA ADR

Wrapped Bitcoin

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wrapped Bitcoin are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Wrapped Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

ArcelorMittal SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ArcelorMittal SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Wrapped Bitcoin and ArcelorMittal

The main advantage of trading using opposite Wrapped Bitcoin and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wrapped Bitcoin 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 Wrapped Bitcoin and ArcelorMittal SA ADR 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.