Correlation Between Nucor and SBM OFFSHORE

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

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

Diversification Opportunities for Nucor and SBM OFFSHORE

0.52

Correlation Coefficient

Nucor  SBM OFFSHORE

Very weak diversification

The 3 months correlation between Nucor and SBM is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nucor and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE 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 SBM OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM OFFSHORE has no effect on the direction of Nucor i.e., Nucor and SBM OFFSHORE go up and down completely randomly.

Pair Corralation between Nucor and SBM OFFSHORE

Assuming the 90 days horizon Nucor is expected to under-perform the SBM OFFSHORE. In addition to that, Nucor is 1.42 times more volatile than SBM OFFSHORE. It trades about -0.01 of its total potential returns per unit of risk. SBM OFFSHORE is currently generating about 0.04 per unit of volatility. If you would invest  1,263  in SBM OFFSHORE on October 4, 2024 and sell it today you would earn a total of  415.00  from holding SBM OFFSHORE or generate 32.86% return on investment over 90 days.

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

Nucor  vs.  SBM OFFSHORE

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.

SBM OFFSHORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBM OFFSHORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SBM OFFSHORE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nucor and SBM OFFSHORE

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

The idea behind Nucor and SBM OFFSHORE 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.