Correlation Between Cleveland Cliffs and Ternium SA

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

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

Diversification Opportunities for Cleveland Cliffs and Ternium SA

-0.17

Correlation Coefficient

Cleveland Cliffs  Ternium SA

Good diversification

The 3 months correlation between Cleveland and Ternium is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Cleveland Cliffs and Ternium SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ternium SA 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 Ternium SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ternium SA ADR has no effect on the direction of Cleveland Cliffs i.e., Cleveland Cliffs and Ternium SA go up and down completely randomly.

Pair Corralation between Cleveland Cliffs and Ternium SA

Considering the 90-day investment horizon Cleveland Cliffs is expected to under-perform the Ternium SA. In addition to that, Cleveland Cliffs is 2.68 times more volatile than Ternium SA ADR. It trades about -0.01 of its total potential returns per unit of risk. Ternium SA ADR is currently generating about 0.1 per unit of volatility. If you would invest  2,878  in Ternium SA ADR on December 29, 2024 and sell it today you would earn a total of  298.00  from holding Ternium SA ADR or generate 10.35% return on investment over 90 days.

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

Cleveland Cliffs  vs.  Ternium SA ADR

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.

Ternium SA ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ternium SA ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Ternium SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cleveland Cliffs and Ternium SA

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

The idea behind Cleveland Cliffs and Ternium SA 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.