Correlation Between Amazon and Cleveland Cliffs

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

Diversification Opportunities for Amazon and Cleveland Cliffs

0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Amazon and Cleveland is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Cleveland-Cliffs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleveland-Cliffs and Amazon 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 Amazon 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 Amazon i.e., Amazon and Cleveland Cliffs go up and down completely randomly.

Pair Corralation between Amazon and Cleveland Cliffs

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Cleveland Cliffs. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 1.05 times less risky than Cleveland Cliffs. The stock trades about -0.02 of its potential returns per unit of risk. The Cleveland-Cliffs is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,361  in Cleveland-Cliffs on September 8, 2022 and sell it today you would earn a total of  251.00  from holding Cleveland-Cliffs or generate 18.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Cleveland-Cliffs

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Cleveland Price Channel

Amazon and Cleveland Cliffs Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Cleveland Cliffs

The main advantage of trading using opposite Amazon and Cleveland Cliffs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.
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The idea behind Amazon 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.
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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