Correlation Between Nucor and Metalfrio Solutions

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

By analyzing existing cross correlation between Nucor and Metalfrio Solutions SA, you can compare the effects of market volatilities on Nucor and Metalfrio Solutions 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 Metalfrio Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nucor and Metalfrio Solutions.

Diversification Opportunities for Nucor and Metalfrio Solutions

-0.49

Correlation Coefficient

Nucor  Metalfrio Solutions

Very good diversification

The 3 months correlation between Nucor and Metalfrio is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Nucor and Metalfrio Solutions SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalfrio Solutions 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 Metalfrio Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalfrio Solutions has no effect on the direction of Nucor i.e., Nucor and Metalfrio Solutions go up and down completely randomly.

Pair Corralation between Nucor and Metalfrio Solutions

Assuming the 90 days trading horizon Nucor is expected to under-perform the Metalfrio Solutions. But the stock apears to be less risky and, when comparing its historical volatility, Nucor is 3.95 times less risky than Metalfrio Solutions. The stock trades about -0.56 of its potential returns per unit of risk. The Metalfrio Solutions SA is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest  15,499  in Metalfrio Solutions SA on October 8, 2024 and sell it today you would earn a total of  15,222  from holding Metalfrio Solutions SA or generate 98.21% return on investment over 90 days.

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

Nucor  vs.  Metalfrio Solutions SA

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Metalfrio Solutions

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Metalfrio Solutions SA are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Metalfrio Solutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nucor and Metalfrio Solutions

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

The idea behind Nucor and Metalfrio Solutions SA 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.