Correlation Between Cleveland Cliffs and ArcelorMittal

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

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

Diversification Opportunities for Cleveland Cliffs and ArcelorMittal

-0.67

Correlation Coefficient

Cleveland Cliffs  ArcelorMittal

Excellent diversification

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

Pair Corralation between Cleveland Cliffs and ArcelorMittal

Considering the 90-day investment horizon Cleveland Cliffs is expected to under-perform the ArcelorMittal. In addition to that, Cleveland Cliffs is 2.24 times more volatile than ArcelorMittal SA. It trades about -0.53 of its total potential returns per unit of risk. ArcelorMittal SA is currently generating about 0.06 per unit of volatility. If you would invest  2,506  in ArcelorMittal SA on September 29, 2024 and sell it today you would earn a total of  33.00  from holding ArcelorMittal SA or generate 1.32% 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.  ArcelorMittal SA

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ArcelorMittal SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, ArcelorMittal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cleveland Cliffs and ArcelorMittal

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

The idea behind Cleveland Cliffs and ArcelorMittal SA 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.