Correlation Between Cleveland Cliffs and Friedman Industries
Can any of the company-specific risk be diversified away by investing in both Cleveland Cliffs and Friedman Industries 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 Friedman Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cleveland Cliffs and Friedman Industries, you can compare the effects of market volatilities on Cleveland Cliffs and Friedman Industries 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 Friedman Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cleveland Cliffs and Friedman Industries.
Diversification Opportunities for Cleveland Cliffs and Friedman Industries
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Cleveland and Friedman is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Cleveland Cliffs and Friedman Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Friedman Industries 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 Friedman Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Friedman Industries has no effect on the direction of Cleveland Cliffs i.e., Cleveland Cliffs and Friedman Industries go up and down completely randomly.
Pair Corralation between Cleveland Cliffs and Friedman Industries
Considering the 90-day investment horizon Cleveland Cliffs is expected to under-perform the Friedman Industries. But the stock apears to be less risky and, when comparing its historical volatility, Cleveland Cliffs is 1.27 times less risky than Friedman Industries. The stock trades about -0.01 of its potential returns per unit of risk. The Friedman Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 988.00 in Friedman Industries on August 31, 2024 and sell it today you would earn a total of 535.00 from holding Friedman Industries or generate 54.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cleveland Cliffs vs. Friedman Industries
Performance |
| Timeline |
| Cleveland Cliffs |
| Friedman Industries |
Cleveland Cliffs and Friedman Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cleveland Cliffs and Friedman Industries
The main advantage of trading using opposite Cleveland Cliffs and Friedman Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cleveland Cliffs position performs unexpectedly, Friedman Industries 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 Friedman Industries will offset losses from the drop in Friedman Industries' long position.| Cleveland Cliffs vs. Nucor Corp | Cleveland Cliffs vs. Steel Dynamics | Cleveland Cliffs vs. ArcelorMittal SA ADR | Cleveland Cliffs vs. Gerdau SA ADR |
| Friedman Industries vs. ArcelorMittal SA | Friedman Industries vs. Aperam PK | Friedman Industries vs. Acerinox SA ADR | Friedman Industries vs. Algoma Steel Group |
Check out your portfolio center.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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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