Correlation Between Microsoft and Nucor Corp
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Nucor Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Nucor Corp, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Nucor Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Nucor Corp.
Diversification Opportunities for Microsoft and Nucor Corp
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Nucor is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Nucor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor Corp and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Nucor Corp go up and down completely randomly.
Pair Corralation between Microsoft and Nucor Corp
Given the investment horizon of 90 days Microsoft is expected to under-perform the Nucor Corp. In addition to that, Microsoft is 1.39 times more volatile than Nucor Corp. It trades about -0.04 of its total potential returns per unit of risk. Nucor Corp is currently generating about 0.41 per unit of volatility. If you would invest 11,818 in Nucor Corp on November 9, 2024 and sell it today you would earn a total of 1,502 from holding Nucor Corp or generate 12.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Nucor Corp
Performance |
| Timeline |
| Microsoft |
| Nucor Corp |
Microsoft and Nucor Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Nucor Corp
The main advantage of trading using opposite Microsoft and Nucor Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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