Correlation Between Cleveland Cliffs and Ferrexpo PLC

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

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

Diversification Opportunities for Cleveland Cliffs and Ferrexpo PLC

-0.71

Correlation Coefficient

Cleveland Cliffs  Ferrexpo PLC

Pay attention - limited upside

The 3 months correlation between Cleveland and Ferrexpo is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Cleveland Cliffs and Ferrexpo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrexpo PLC 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 Ferrexpo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrexpo PLC has no effect on the direction of Cleveland Cliffs i.e., Cleveland Cliffs and Ferrexpo PLC go up and down completely randomly.

Pair Corralation between Cleveland Cliffs and Ferrexpo PLC

Considering the 90-day investment horizon Cleveland Cliffs is expected to under-perform the Ferrexpo PLC. But the stock apears to be less risky and, when comparing its historical volatility, Cleveland Cliffs is 5.61 times less risky than Ferrexpo PLC. The stock trades about -0.53 of its potential returns per unit of risk. The Ferrexpo PLC is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  95.00  in Ferrexpo PLC on September 29, 2024 and sell it today you would earn a total of  28.00  from holding Ferrexpo PLC or generate 29.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.91%
Values	Daily Returns

Cleveland Cliffs  vs.  Ferrexpo PLC

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.

Ferrexpo PLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ferrexpo PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Ferrexpo PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cleveland Cliffs and Ferrexpo PLC

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

The idea behind Cleveland Cliffs and Ferrexpo PLC 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.