Correlation Between Cleveland Cliffs and Charles Schwab

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Can any of the company-specific risk be diversified away by investing in both Cleveland Cliffs and Charles Schwab 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 Charles Schwab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cleveland Cliffs and Charles Schwab Corp, you can compare the effects of market volatilities on Cleveland Cliffs and Charles Schwab 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 Charles Schwab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cleveland Cliffs and Charles Schwab.

Diversification Opportunities for Cleveland Cliffs and Charles Schwab

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Cleveland and Charles is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cleveland-Cliffs and Charles Schwab Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Schwab Corp 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 Charles Schwab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Schwab Corp has no effect on the direction of Cleveland Cliffs i.e., Cleveland Cliffs and Charles Schwab go up and down completely randomly.

Pair Corralation between Cleveland Cliffs and Charles Schwab

Considering the 90-day investment horizon Cleveland Cliffs is expected to generate 1.05 times less return on investment than Charles Schwab. In addition to that, Cleveland Cliffs is 1.88 times more volatile than Charles Schwab Corp. It trades about 0.2 of its total potential returns per unit of risk. Charles Schwab Corp is currently generating about 0.4 per unit of volatility. If you would invest  6,535  in Charles Schwab Corp on December 29, 2023 and sell it today you would earn a total of  699.00  from holding Charles Schwab Corp or generate 10.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Cleveland-Cliffs  vs.  Charles Schwab Corp

 Performance 
       Timeline  
Cleveland-Cliffs 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Cleveland Cliffs are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Cleveland Cliffs may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Charles Schwab Corp 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Charles Schwab Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical indicators, Charles Schwab is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Cleveland Cliffs and Charles Schwab Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cleveland Cliffs and Charles Schwab

The main advantage of trading using opposite Cleveland Cliffs and Charles Schwab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cleveland Cliffs position performs unexpectedly, Charles Schwab 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 Charles Schwab will offset losses from the drop in Charles Schwab's long position.
The idea behind Cleveland Cliffs and Charles Schwab Corp 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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