Correlation Between Cleveland Cliffs and Commercial Metals

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

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

Diversification Opportunities for Cleveland Cliffs and Commercial Metals

0.55

Correlation Coefficient

Cleveland Cliffs  Commercial Metals

Very weak diversification

The 3 months correlation between Cleveland and Commercial is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Cleveland Cliffs and Commercial Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial Metals 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 Commercial Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial Metals has no effect on the direction of Cleveland Cliffs i.e., Cleveland Cliffs and Commercial Metals go up and down completely randomly.

Pair Corralation between Cleveland Cliffs and Commercial Metals

Considering the 90-day investment horizon Cleveland Cliffs is expected to generate 2.02 times more return on investment than Commercial Metals. However, Cleveland Cliffs is 2.02 times more volatile than Commercial Metals. It trades about -0.01 of its potential returns per unit of risk. Commercial Metals is currently generating about -0.03 per unit of risk. If you would invest  930.00  in Cleveland Cliffs on December 30, 2024 and sell it today you would lose (78.00) from holding Cleveland Cliffs or give up 8.39% of portfolio value over 90 days.

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

Cleveland Cliffs  vs.  Commercial Metals

Cleveland Cliffs

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cleveland Cliffs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Cleveland Cliffs is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Commercial Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Commercial Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Commercial Metals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cleveland Cliffs and Commercial Metals

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

The idea behind Cleveland Cliffs and Commercial Metals 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.