Correlation Between Nucor Corp and POSCO Holdings

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

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

Diversification Opportunities for Nucor Corp and POSCO Holdings

-0.13

Correlation Coefficient

Nucor Corp  POSCO Holdings

Good diversification

The 3 months correlation between Nucor and POSCO is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Nucor Corp and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and Nucor Corp 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 Corp are associated (or correlated) with POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of Nucor Corp i.e., Nucor Corp and POSCO Holdings go up and down completely randomly.

Pair Corralation between Nucor Corp and POSCO Holdings

Considering the 90-day investment horizon Nucor Corp is expected to generate 1.1 times more return on investment than POSCO Holdings. However, Nucor Corp is 1.1 times more volatile than POSCO Holdings. It trades about 0.03 of its potential returns per unit of risk. POSCO Holdings is currently generating about -0.1 per unit of risk. If you would invest  15,137  in Nucor Corp on August 30, 2024 and sell it today you would earn a total of  340.00  from holding Nucor Corp or generate 2.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Nucor Corp  vs.  POSCO Holdings

Nucor Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nucor Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Nucor Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

POSCO Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days POSCO Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Nucor Corp and POSCO Holdings

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

The idea behind Nucor Corp and POSCO Holdings 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.