Correlation Between Cleveland Cliffs and Salzgitter

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

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

Diversification Opportunities for Cleveland Cliffs and Salzgitter

-0.02

Correlation Coefficient

Cleveland Cliffs  Salzgitter

Good diversification

The 3 months correlation between Cleveland and Salzgitter is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Cleveland Cliffs and Salzgitter AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salzgitter AG ADR 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 Salzgitter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salzgitter AG ADR has no effect on the direction of Cleveland Cliffs i.e., Cleveland Cliffs and Salzgitter go up and down completely randomly.

Pair Corralation between Cleveland Cliffs and Salzgitter

Considering the 90-day investment horizon Cleveland Cliffs is expected to under-perform the Salzgitter. In addition to that, Cleveland Cliffs is 1.19 times more volatile than Salzgitter AG ADR. It trades about -0.53 of its total potential returns per unit of risk. Salzgitter AG ADR is currently generating about -0.23 per unit of volatility. If you would invest  177.00  in Salzgitter AG ADR on September 29, 2024 and sell it today you would lose (19.00) from holding Salzgitter AG ADR or give up 10.73% of portfolio value over 90 days.

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

Cleveland Cliffs  vs.  Salzgitter AG ADR

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.

Salzgitter AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salzgitter AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Salzgitter is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cleveland Cliffs and Salzgitter

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

The idea behind Cleveland Cliffs and Salzgitter AG ADR 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.