Correlation Between Columbia Sportswear and Nucor

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

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

Diversification Opportunities for Columbia Sportswear and Nucor

-0.19

Correlation Coefficient

Columbia Sportswear  Nucor

Good diversification

The 3 months correlation between Columbia and Nucor is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Sportswear and Nucor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor and Columbia Sportswear 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 Columbia Sportswear 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 Columbia Sportswear i.e., Columbia Sportswear and Nucor go up and down completely randomly.

Pair Corralation between Columbia Sportswear and Nucor

Assuming the 90 days horizon Columbia Sportswear is expected to generate 0.77 times more return on investment than Nucor. However, Columbia Sportswear is 1.3 times less risky than Nucor. It trades about 0.01 of its potential returns per unit of risk. Nucor is currently generating about -0.01 per unit of risk. If you would invest  8,131  in Columbia Sportswear on October 4, 2024 and sell it today you would earn a total of  19.00  from holding Columbia Sportswear or generate 0.23% return on investment over 90 days.

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

Columbia Sportswear  vs.  Nucor

Columbia Sportswear

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Sportswear are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Columbia Sportswear reported solid returns over the last few months and may actually be approaching a breakup point.

Nucor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nucor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Columbia Sportswear and Nucor

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

The idea behind Columbia Sportswear and Nucor 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.