Correlation Between Cleveland Cliffs and Compania

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

By analyzing existing cross correlation between Cleveland Cliffs and Compania de Minas, you can compare the effects of market volatilities on Cleveland Cliffs and Compania 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 Cleveland Cliffs with a short position of Compania. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cleveland Cliffs and Compania.

Diversification Opportunities for Cleveland Cliffs and Compania

0.53

Correlation Coefficient

Cleveland Cliffs  Compania

Very weak diversification

The 3 months correlation between Cleveland and Compania is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cleveland Cliffs and Compania de Minas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Minas and Cleveland Cliffs 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 Cleveland Cliffs are associated (or correlated) with Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Minas has no effect on the direction of Cleveland Cliffs i.e., Cleveland Cliffs and Compania go up and down completely randomly.

Pair Corralation between Cleveland Cliffs and Compania

Considering the 90-day investment horizon Cleveland Cliffs is expected to generate 2.02 times less return on investment than Compania. But when comparing it to its historical volatility, Cleveland Cliffs is 1.1 times less risky than Compania. It trades about 0.08 of its potential returns per unit of risk. Compania de Minas is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  697.00  in Compania de Minas on January 19, 2024 and sell it today you would earn a total of  904.00  from holding Compania de Minas or generate 129.7% return on investment over 90 days.

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

Cleveland Cliffs  vs.  Compania de Minas

Cleveland Cliffs

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cleveland Cliffs are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Cleveland Cliffs reported solid returns over the last few months and may actually be approaching a breakup point.

Compania de Minas

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Minas are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Compania is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cleveland Cliffs and Compania

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

The idea behind Cleveland Cliffs and Compania de Minas 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.