Correlation Between Fortuna Silver and Nucor Corp

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

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

Diversification Opportunities for Fortuna Silver and Nucor Corp

0.5

Correlation Coefficient

Fortuna Silver  Nucor Corp

Very weak diversification

The 3 months correlation between Fortuna and Nucor is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Fortuna Silver Mines and Nucor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor Corp and Fortuna Silver 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 Fortuna Silver Mines 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 Fortuna Silver i.e., Fortuna Silver and Nucor Corp go up and down completely randomly.

Pair Corralation between Fortuna Silver and Nucor Corp

Considering the 90-day investment horizon Fortuna Silver Mines is expected to generate 1.53 times more return on investment than Nucor Corp. However, Fortuna Silver is 1.53 times more volatile than Nucor Corp. It trades about 0.03 of its potential returns per unit of risk. Nucor Corp is currently generating about -0.01 per unit of risk. If you would invest  373.00  in Fortuna Silver Mines on October 10, 2024 and sell it today you would earn a total of  75.00  from holding Fortuna Silver Mines or generate 20.11% return on investment over 90 days.

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

Fortuna Silver Mines  vs.  Nucor Corp

Fortuna Silver Mines

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Fortuna Silver Mines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Fortuna Silver is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

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 weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Fortuna Silver and Nucor Corp

The main advantage of trading using opposite Fortuna Silver and Nucor Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortuna Silver 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 Fortuna Silver Mines 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.