Correlation Between Select Sector and Cleveland Cliffs
Can any of the company-specific risk be diversified away by investing in both Select Sector 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 Select Sector and Cleveland Cliffs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Select Sector and Cleveland Cliffs, you can compare the effects of market volatilities on Select Sector 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 Select Sector with a short position of Cleveland Cliffs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Sector and Cleveland Cliffs.
Diversification Opportunities for Select Sector and Cleveland Cliffs
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Select and Cleveland is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding The Select Sector and Cleveland Cliffs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleveland Cliffs and Select Sector 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 The Select Sector 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 Select Sector i.e., Select Sector and Cleveland Cliffs go up and down completely randomly.
Pair Corralation between Select Sector and Cleveland Cliffs
Assuming the 90 days trading horizon The Select Sector is expected to generate 0.67 times more return on investment than Cleveland Cliffs. However, The Select Sector is 1.49 times less risky than Cleveland Cliffs. It trades about 0.12 of its potential returns per unit of risk. Cleveland Cliffs is currently generating about -0.03 per unit of risk. If you would invest 105,695 in The Select Sector on September 1, 2024 and sell it today you would earn a total of 64,905 from holding The Select Sector or generate 61.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
The Select Sector vs. Cleveland Cliffs
Performance |
| Timeline |
| Select Sector |
| Cleveland Cliffs |
Select Sector and Cleveland Cliffs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Sector and Cleveland Cliffs
The main advantage of trading using opposite Select Sector and Cleveland Cliffs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Sector 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.| Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector |
| Cleveland Cliffs vs. Rio Tinto Group | Cleveland Cliffs vs. Vale SA | Cleveland Cliffs vs. Glencore plc | Cleveland Cliffs vs. Minera Frisco SAB |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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