Correlation Between Cleveland Cliffs and GMxico Transportes

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

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

Diversification Opportunities for Cleveland Cliffs and GMxico Transportes

-0.42

Correlation Coefficient

Cleveland Cliffs  GMxico Transportes

Very good diversification

The 3 months correlation between Cleveland and GMxico is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Cleveland Cliffs and GMxico Transportes SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMxico Transportes SAB 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 GMxico Transportes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMxico Transportes SAB has no effect on the direction of Cleveland Cliffs i.e., Cleveland Cliffs and GMxico Transportes go up and down completely randomly.

Pair Corralation between Cleveland Cliffs and GMxico Transportes

Assuming the 90 days trading horizon Cleveland Cliffs is expected to generate 2.1 times more return on investment than GMxico Transportes. However, Cleveland Cliffs is 2.1 times more volatile than GMxico Transportes SAB. It trades about 0.04 of its potential returns per unit of risk. GMxico Transportes SAB is currently generating about 0.01 per unit of risk. If you would invest  24,649  in Cleveland Cliffs on September 4, 2024 and sell it today you would earn a total of  1,511  from holding Cleveland Cliffs or generate 6.13% return on investment over 90 days.

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

Cleveland Cliffs  vs.  GMxico Transportes SAB

Cleveland Cliffs

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cleveland Cliffs are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Cleveland Cliffs may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GMxico Transportes SAB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cleveland Cliffs and GMxico Transportes

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

The idea behind Cleveland Cliffs and GMxico Transportes SAB 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.