Correlation Between Nucor Corp and Sims

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

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

Diversification Opportunities for Nucor Corp and Sims

-0.04

Correlation Coefficient

Nucor Corp  Sims

Good diversification

The 3 months correlation between Nucor and Sims is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Nucor Corp and Sims Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Limited 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 Sims. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims Limited has no effect on the direction of Nucor Corp i.e., Nucor Corp and Sims go up and down completely randomly.

Pair Corralation between Nucor Corp and Sims

Considering the 90-day investment horizon Nucor Corp is expected to generate 1.11 times less return on investment than Sims. But when comparing it to its historical volatility, Nucor Corp is 2.47 times less risky than Sims. It trades about 0.22 of its potential returns per unit of risk. Sims Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  811.00  in Sims Limited on October 22, 2024 and sell it today you would earn a total of  52.00  from holding Sims Limited or generate 6.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Nucor Corp  vs.  Sims Limited

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.

Sims Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sims Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sims may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nucor Corp and Sims

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

The idea behind Nucor Corp and Sims Limited 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.