Correlation Between Webco Industries and Cleveland Cliffs

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

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

Diversification Opportunities for Webco Industries and Cleveland Cliffs

0.19

Correlation Coefficient

Webco Industries  Cleveland Cliffs

Average diversification

The 3 months correlation between Webco and Cleveland is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Webco Industries and Cleveland Cliffs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleveland Cliffs and Webco Industries 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 Webco Industries 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 Webco Industries i.e., Webco Industries and Cleveland Cliffs go up and down completely randomly.

Pair Corralation between Webco Industries and Cleveland Cliffs

If you would invest  17,500  in Webco Industries on February 5, 2024 and sell it today you would earn a total of  0.00  from holding Webco Industries or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Webco Industries  vs.  Cleveland Cliffs

Webco Industries

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Webco Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather abnormal fundamental drivers, Webco Industries may actually be approaching a critical reversion point that can send shares even higher in June 2024.

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 latest unsteady performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Webco Industries and Cleveland Cliffs

The main advantage of trading using opposite Webco Industries and Cleveland Cliffs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Webco Industries 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 Webco Industries 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.