Correlation Between Mount Gibson and Nucor
Can any of the company-specific risk be diversified away by investing in both Mount Gibson and Nucor 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 Mount Gibson and Nucor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mount Gibson Iron and Nucor, you can compare the effects of market volatilities on Mount Gibson and Nucor 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 Mount Gibson with a short position of Nucor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mount Gibson and Nucor.
Diversification Opportunities for Mount Gibson and Nucor
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Mount and Nucor is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Mount Gibson Iron and Nucor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor and Mount Gibson 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 Mount Gibson Iron are associated (or correlated) with Nucor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nucor has no effect on the direction of Mount Gibson i.e., Mount Gibson and Nucor go up and down completely randomly.
Pair Corralation between Mount Gibson and Nucor
Assuming the 90 days horizon Mount Gibson Iron is expected to under-perform the Nucor. In addition to that, Mount Gibson is 2.34 times more volatile than Nucor. It trades about -0.01 of its total potential returns per unit of risk. Nucor is currently generating about -0.01 per unit of volatility. If you would invest 15,606 in Nucor on October 25, 2024 and sell it today you would lose (3,728) from holding Nucor or give up 23.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mount Gibson Iron vs. Nucor
Performance |
| Timeline |
| Mount Gibson Iron |
| Nucor |
Mount Gibson and Nucor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mount Gibson and Nucor
The main advantage of trading using opposite Mount Gibson and Nucor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mount Gibson position performs unexpectedly, Nucor 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 will offset losses from the drop in Nucor's long position.| Mount Gibson vs. SYSTEMAIR AB | Mount Gibson vs. Fevertree Drinks PLC | Mount Gibson vs. SEALED AIR | Mount Gibson vs. United Breweries Co |
| Nucor vs. Erste Group Bank | Nucor vs. CDN IMPERIAL BANK | Nucor vs. Peijia Medical Limited | Nucor vs. Merit Medical Systems |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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