Correlation Between Dow Jones and Nucor Corp
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Nucor Corp 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 Dow Jones and Nucor Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Nucor Corp, you can compare the effects of market volatilities on Dow Jones and Nucor Corp 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 Dow Jones with a short position of Nucor Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Nucor Corp.
Diversification Opportunities for Dow Jones and Nucor Corp
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Nucor is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Nucor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor Corp and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Nucor Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nucor Corp has no effect on the direction of Dow Jones i.e., Dow Jones and Nucor Corp go up and down completely randomly.
Pair Corralation between Dow Jones and Nucor Corp
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.27 times more return on investment than Nucor Corp. However, Dow Jones Industrial is 3.73 times less risky than Nucor Corp. It trades about 0.13 of its potential returns per unit of risk. Nucor Corp is currently generating about 0.01 per unit of risk. If you would invest 4,124,052 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 262,983 from holding Dow Jones Industrial or generate 6.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Nucor Corp
Performance |
| Timeline |
Dow Jones and Nucor Corp Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Nucor Corp
Pair trading matchups for Nucor Corp
Pair Trading with Dow Jones and Nucor Corp
The main advantage of trading using opposite Dow Jones and Nucor Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Nucor Corp 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 Nucor Corp will offset losses from the drop in Nucor Corp's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| Nucor Corp vs. United States Steel | Nucor Corp vs. Reliance Steel Aluminum | Nucor Corp vs. ArcelorMittal SA ADR | Nucor Corp vs. Commercial Metals |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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