Correlation Between Grupo Hotelero and Cleveland Cliffs

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

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

Diversification Opportunities for Grupo Hotelero and Cleveland Cliffs

0.04

Correlation Coefficient

Grupo Hotelero  Cleveland Cliffs

Significant diversification

The 3 months correlation between Grupo and Cleveland is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Hotelero Santa and Cleveland Cliffs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleveland Cliffs and Grupo Hotelero 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 Grupo Hotelero Santa 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 Grupo Hotelero i.e., Grupo Hotelero and Cleveland Cliffs go up and down completely randomly.

Pair Corralation between Grupo Hotelero and Cleveland Cliffs

Assuming the 90 days trading horizon Grupo Hotelero Santa is expected to generate 0.53 times more return on investment than Cleveland Cliffs. However, Grupo Hotelero Santa is 1.9 times less risky than Cleveland Cliffs. It trades about 0.05 of its potential returns per unit of risk. Cleveland Cliffs is currently generating about -0.09 per unit of risk. If you would invest  370.00  in Grupo Hotelero Santa on September 30, 2024 and sell it today you would earn a total of  20.00  from holding Grupo Hotelero Santa or generate 5.41% return on investment over 90 days.

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

Grupo Hotelero Santa  vs.  Cleveland Cliffs

Grupo Hotelero Santa

Risk-Adjusted Performance

3 of 100

Insignificant

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

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. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Grupo Hotelero and Cleveland Cliffs

The main advantage of trading using opposite Grupo Hotelero and Cleveland Cliffs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Hotelero 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 Grupo Hotelero Santa 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.