Correlation Between China Communications and Nucor Corp

Can any of the company-specific risk be diversified away by investing in both China Communications 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 Communications 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 Communications Services and Nucor Corp, you can compare the effects of market volatilities on China Communications 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 Communications with a short position of Nucor Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and Nucor Corp.

Diversification Opportunities for China Communications and Nucor Corp

-0.76

Correlation Coefficient

China Communications  Nucor Corp

Pay attention - limited upside

The 3 months correlation between China and Nucor is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and Nucor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor Corp and China Communications 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 Communications Services 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 Communications i.e., China Communications and Nucor Corp go up and down completely randomly.

Pair Corralation between China Communications and Nucor Corp

Assuming the 90 days horizon China Communications Services is expected to under-perform the Nucor Corp. In addition to that, China Communications is 1.16 times more volatile than Nucor Corp. It trades about -0.07 of its total potential returns per unit of risk. Nucor Corp is currently generating about 0.34 per unit of volatility. If you would invest  11,141  in Nucor Corp on October 22, 2024 and sell it today you would earn a total of  783.00  from holding Nucor Corp or generate 7.03% return on investment over 90 days.

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

China Communications Services  vs.  Nucor Corp

China Communications

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nucor Corp

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with China Communications and Nucor Corp

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

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.