Correlation Between China Hongqiao and Nucor Corp

Can any of the company-specific risk be diversified away by investing in both China Hongqiao 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 China Hongqiao and Nucor Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Hongqiao Group and Nucor Corp, you can compare the effects of market volatilities on China Hongqiao 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 China Hongqiao with a short position of Nucor Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Hongqiao and Nucor Corp.

Diversification Opportunities for China Hongqiao and Nucor Corp

-0.23

Correlation Coefficient

China Hongqiao  Nucor Corp

Very good diversification

The 3 months correlation between China and Nucor is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding China Hongqiao Group and Nucor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor Corp and China Hongqiao 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 China Hongqiao Group 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 China Hongqiao i.e., China Hongqiao and Nucor Corp go up and down completely randomly.

Pair Corralation between China Hongqiao and Nucor Corp

Assuming the 90 days horizon China Hongqiao Group is expected to under-perform the Nucor Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Hongqiao Group is 3.46 times less risky than Nucor Corp. The pink sheet trades about -0.16 of its potential returns per unit of risk. The Nucor Corp is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  11,448  in Nucor Corp on December 2, 2024 and sell it today you would earn a total of  2,299  from holding Nucor Corp or generate 20.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

China Hongqiao Group  vs.  Nucor Corp

China Hongqiao Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Hongqiao Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Hongqiao is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Nucor Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nucor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with China Hongqiao and Nucor Corp

The main advantage of trading using opposite China Hongqiao and Nucor Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Hongqiao 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.

The idea behind China Hongqiao Group and Nucor Corp 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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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.