Correlation Between Nucor and SIMS

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

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

Diversification Opportunities for Nucor and SIMS

0.79

Correlation Coefficient

Nucor  SIMS

Poor diversification

The 3 months correlation between Nucor and SIMS is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Nucor and SIMS LTD ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMS LTD ADR 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 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 LTD ADR has no effect on the direction of Nucor i.e., Nucor and SIMS go up and down completely randomly.

Pair Corralation between Nucor and SIMS

Assuming the 90 days horizon Nucor is expected to under-perform the SIMS. In addition to that, Nucor is 1.08 times more volatile than SIMS LTD ADR. It trades about -0.09 of its total potential returns per unit of risk. SIMS LTD ADR is currently generating about 0.02 per unit of volatility. If you would invest  705.00  in SIMS LTD ADR on October 10, 2024 and sell it today you would earn a total of  5.00  from holding SIMS LTD ADR or generate 0.71% return on investment over 90 days.

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

Nucor  vs.  SIMS LTD ADR

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SIMS LTD ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SIMS LTD ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, SIMS is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nucor and SIMS

The main advantage of trading using opposite Nucor and SIMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nucor 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's long position.

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