Correlation Between ArcelorMittal and Cleveland Cliffs

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

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

Diversification Opportunities for ArcelorMittal and Cleveland Cliffs

0.53

Correlation Coefficient

ArcelorMittal  Cleveland Cliffs

Very weak diversification

The 3 months correlation between ArcelorMittal and Cleveland is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and Cleveland Cliffs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleveland Cliffs and ArcelorMittal 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 ArcelorMittal SA ADR are associated (or correlated) with Cleveland Cliffs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleveland Cliffs has no effect on the direction of ArcelorMittal i.e., ArcelorMittal and Cleveland Cliffs go up and down completely randomly.

Pair Corralation between ArcelorMittal and Cleveland Cliffs

Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to generate 0.58 times more return on investment than Cleveland Cliffs. However, ArcelorMittal SA ADR is 1.73 times less risky than Cleveland Cliffs. It trades about 0.08 of its potential returns per unit of risk. Cleveland Cliffs is currently generating about -0.03 per unit of risk. If you would invest  2,528  in ArcelorMittal SA ADR on November 28, 2024 and sell it today you would earn a total of  263.00  from holding ArcelorMittal SA ADR or generate 10.4% return on investment over 90 days.

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

ArcelorMittal SA ADR  vs.  Cleveland Cliffs

ArcelorMittal SA ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, ArcelorMittal may actually be approaching a critical reversion point that can send shares even higher in March 2025.

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 latest unsteady performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ArcelorMittal and Cleveland Cliffs

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

The idea behind ArcelorMittal SA ADR and Cleveland Cliffs 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.