Correlation Between Insurance Australia and Nucor Corp

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

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

Diversification Opportunities for Insurance Australia and Nucor Corp

-0.04

Correlation Coefficient

Insurance Australia  Nucor Corp

Good diversification

The 3 months correlation between Insurance and Nucor is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Nucor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor Corp and Insurance Australia 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 Insurance Australia Group 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 Insurance Australia i.e., Insurance Australia and Nucor Corp go up and down completely randomly.

Pair Corralation between Insurance Australia and Nucor Corp

Assuming the 90 days horizon Insurance Australia Group is expected to under-perform the Nucor Corp. In addition to that, Insurance Australia is 1.23 times more volatile than Nucor Corp. It trades about -0.08 of its total potential returns per unit of risk. Nucor Corp is currently generating about 0.05 per unit of volatility. If you would invest  11,141  in Nucor Corp on December 22, 2024 and sell it today you would earn a total of  517.00  from holding Nucor Corp or generate 4.64% return on investment over 90 days.

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

Insurance Australia Group  vs.  Nucor Corp

Insurance Australia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Insurance Australia Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Nucor Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nucor Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Nucor Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Insurance Australia and Nucor Corp

The main advantage of trading using opposite Insurance Australia and Nucor Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia 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 Insurance Australia Group 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.