Correlation Between Nucor Corp and Steel Dynamics
Can any of the company-specific risk be diversified away by investing in both Nucor Corp and Steel Dynamics 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 Nucor Corp and Steel Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nucor Corp and Steel Dynamics, you can compare the effects of market volatilities on Nucor Corp and Steel Dynamics 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 Nucor Corp with a short position of Steel Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nucor Corp and Steel Dynamics.
Diversification Opportunities for Nucor Corp and Steel Dynamics
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nucor and Steel is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nucor Corp and Steel Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Dynamics and Nucor Corp 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 Nucor Corp are associated (or correlated) with Steel Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Dynamics has no effect on the direction of Nucor Corp i.e., Nucor Corp and Steel Dynamics go up and down completely randomly.
Pair Corralation between Nucor Corp and Steel Dynamics
Considering the 90-day investment horizon Nucor Corp is expected to generate 1.55 times less return on investment than Steel Dynamics. In addition to that, Nucor Corp is 1.14 times more volatile than Steel Dynamics. It trades about 0.09 of its total potential returns per unit of risk. Steel Dynamics is currently generating about 0.17 per unit of volatility. If you would invest 12,864 in Steel Dynamics on August 24, 2024 and sell it today you would earn a total of 1,642 from holding Steel Dynamics or generate 12.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nucor Corp vs. Steel Dynamics
Performance |
| Timeline |
| Nucor Corp |
| Steel Dynamics |
Nucor Corp and Steel Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nucor Corp and Steel Dynamics
The main advantage of trading using opposite Nucor Corp and Steel Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nucor Corp position performs unexpectedly, Steel Dynamics 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 Steel Dynamics will offset losses from the drop in Steel Dynamics' long position.| Nucor Corp vs. United States Steel | Nucor Corp vs. Reliance Steel Aluminum | Nucor Corp vs. ArcelorMittal SA ADR | Nucor Corp vs. Commercial Metals |
| Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. Reliance Steel Aluminum | Steel Dynamics vs. Nucor Corp |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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