Correlation Between Cleveland Cliffs and Grupo Herdez

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

By analyzing existing cross correlation between Cleveland Cliffs and Grupo Herdez SAB, you can compare the effects of market volatilities on Cleveland Cliffs and Grupo Herdez 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 Grupo Herdez. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cleveland Cliffs and Grupo Herdez.

Diversification Opportunities for Cleveland Cliffs and Grupo Herdez

-0.64

Correlation Coefficient

Cleveland Cliffs  Grupo Herdez

Excellent diversification

The 3 months correlation between Cleveland and Grupo is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cleveland Cliffs and Grupo Herdez SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Herdez SAB 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 Grupo Herdez. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Herdez SAB has no effect on the direction of Cleveland Cliffs i.e., Cleveland Cliffs and Grupo Herdez go up and down completely randomly.

Pair Corralation between Cleveland Cliffs and Grupo Herdez

Assuming the 90 days trading horizon Cleveland Cliffs is expected to generate 2.48 times more return on investment than Grupo Herdez. However, Cleveland Cliffs is 2.48 times more volatile than Grupo Herdez SAB. It trades about 0.16 of its potential returns per unit of risk. Grupo Herdez SAB is currently generating about 0.01 per unit of risk. If you would invest  18,850  in Cleveland Cliffs on October 26, 2024 and sell it today you would earn a total of  1,650  from holding Cleveland Cliffs or generate 8.75% return on investment over 90 days.

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

Cleveland Cliffs  vs.  Grupo Herdez SAB

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. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Grupo Herdez SAB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Herdez SAB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Grupo Herdez may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cleveland Cliffs and Grupo Herdez

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

The idea behind Cleveland Cliffs and Grupo Herdez SAB 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.