Correlation Between Cleveland Cliffs and Masco

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

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

Diversification Opportunities for Cleveland Cliffs and Masco

-0.61

Correlation Coefficient

Cleveland Cliffs  Masco

Excellent diversification

The 3 months correlation between Cleveland and Masco is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Cleveland Cliffs and Masco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masco 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 Masco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masco has no effect on the direction of Cleveland Cliffs i.e., Cleveland Cliffs and Masco go up and down completely randomly.

Pair Corralation between Cleveland Cliffs and Masco

Assuming the 90 days trading horizon Cleveland Cliffs is expected to under-perform the Masco. In addition to that, Cleveland Cliffs is 65.56 times more volatile than Masco. It trades about -0.06 of its total potential returns per unit of risk. Masco is currently generating about 0.13 per unit of volatility. If you would invest  114,242  in Masco on October 11, 2024 and sell it today you would earn a total of  584.00  from holding Masco or generate 0.51% 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.  Masco

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.

Masco

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Masco are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Masco is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cleveland Cliffs and Masco

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

The idea behind Cleveland Cliffs and Masco 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 Global Correlations module to find global opportunities by holding instruments from different markets.