Correlation Between Nucor and Diamondback Energy,

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

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

Diversification Opportunities for Nucor and Diamondback Energy,

0.41

Correlation Coefficient

Nucor  Diamondback Energy,

Very weak diversification

The 3 months correlation between Nucor and Diamondback is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Nucor and Diamondback Energy, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondback Energy, and Nucor 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 are associated (or correlated) with Diamondback Energy,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondback Energy, has no effect on the direction of Nucor i.e., Nucor and Diamondback Energy, go up and down completely randomly.

Pair Corralation between Nucor and Diamondback Energy,

Assuming the 90 days trading horizon Nucor is expected to generate 12.13 times less return on investment than Diamondback Energy,. In addition to that, Nucor is 1.02 times more volatile than Diamondback Energy,. It trades about 0.0 of its total potential returns per unit of risk. Diamondback Energy, is currently generating about 0.05 per unit of volatility. If you would invest  35,881  in Diamondback Energy, on October 22, 2024 and sell it today you would earn a total of  18,325  from holding Diamondback Energy, or generate 51.07% return on investment over 90 days.

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

Nucor  vs.  Diamondback Energy,

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 somewhat strong basic indicators, Nucor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Diamondback Energy,

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diamondback Energy, are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Diamondback Energy, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nucor and Diamondback Energy,

The main advantage of trading using opposite Nucor and Diamondback Energy, positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nucor position performs unexpectedly, Diamondback Energy, 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 Diamondback Energy, will offset losses from the drop in Diamondback Energy,'s long position.

The idea behind Nucor and Diamondback Energy, 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.