Correlation Between Hudbay Minerals and Cleveland Cliffs

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

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

Diversification Opportunities for Hudbay Minerals and Cleveland Cliffs

-0.6

Correlation Coefficient

Hudbay Minerals  Cleveland Cliffs

Excellent diversification

The 3 months correlation between Hudbay and Cleveland is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Hudbay Minerals and Cleveland Cliffs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleveland Cliffs and Hudbay Minerals 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 Hudbay Minerals are associated (or correlated) with Cleveland Cliffs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleveland Cliffs has no effect on the direction of Hudbay Minerals i.e., Hudbay Minerals and Cleveland Cliffs go up and down completely randomly.

Pair Corralation between Hudbay Minerals and Cleveland Cliffs

Considering the 90-day investment horizon Hudbay Minerals is expected to generate 2.21 times more return on investment than Cleveland Cliffs. However, Hudbay Minerals is 2.21 times more volatile than Cleveland Cliffs. It trades about 0.23 of its potential returns per unit of risk. Cleveland Cliffs is currently generating about -0.16 per unit of risk. If you would invest  773.00  in Hudbay Minerals on February 23, 2024 and sell it today you would earn a total of  175.00  from holding Hudbay Minerals or generate 22.64% return on investment over 90 days.

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

Hudbay Minerals  vs.  Cleveland Cliffs

Hudbay Minerals

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hudbay Minerals are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Hudbay Minerals displayed solid returns over the last few months and may actually be approaching a breakup point.

Cleveland Cliffs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cleveland Cliffs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Hudbay Minerals and Cleveland Cliffs

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

The idea behind Hudbay Minerals and Cleveland Cliffs 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.