Correlation Between Apple and Cleveland Cliffs

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Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Cleveland Cliffs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Cleveland-Cliffs, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Cleveland Cliffs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Cleveland Cliffs.

Diversification Opportunities for Apple and Cleveland Cliffs

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Apple and Cleveland is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Cleveland-Cliffs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleveland-Cliffs and Apple 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 Apple Inc 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 Apple i.e., Apple and Cleveland Cliffs go up and down completely randomly.

Pair Corralation between Apple and Cleveland Cliffs

Given the investment horizon of 90 days Apple Inc is expected to generate 0.62 times more return on investment than Cleveland Cliffs. However, Apple Inc is 1.61 times less risky than Cleveland Cliffs. It trades about -0.2 of its potential returns per unit of risk. Cleveland-Cliffs is currently generating about -0.28 per unit of risk. If you would invest  15,722  in Apple Inc on July 2, 2022 and sell it today you would lose (1,474)  from holding Apple Inc or give up 9.38% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Apple Inc  vs.  Cleveland-Cliffs

 Performance (%) 
       Timeline  
Apple Inc 
Apple Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Apple is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Apple Price Channel

Cleveland-Cliffs 
Cleveland Performance
0 of 100
Over the last 90 days Cleveland-Cliffs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Cleveland Cliffs is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Cleveland Price Channel

Apple and Cleveland Cliffs Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Apple and Cleveland Cliffs

The main advantage of trading using opposite Apple and Cleveland Cliffs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.
Apple vs. Amazon Inc
The idea behind Apple Inc 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.
Cleveland Cliffs vs. Amazon Inc
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 CEO Directory module to screen CEOs from public companies around the world.

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