Correlation Between Nucor and THORNEY TECHS

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

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

Diversification Opportunities for Nucor and THORNEY TECHS

0.51

Correlation Coefficient

Nucor  THORNEY TECHS

Very weak diversification

The 3 months correlation between Nucor and THORNEY is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Nucor and THORNEY TECHS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THORNEY TECHS LTD 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 THORNEY TECHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THORNEY TECHS LTD has no effect on the direction of Nucor i.e., Nucor and THORNEY TECHS go up and down completely randomly.

Pair Corralation between Nucor and THORNEY TECHS

Assuming the 90 days horizon Nucor is expected to under-perform the THORNEY TECHS. But the stock apears to be less risky and, when comparing its historical volatility, Nucor is 2.13 times less risky than THORNEY TECHS. The stock trades about -0.76 of its potential returns per unit of risk. The THORNEY TECHS LTD is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  7.45  in THORNEY TECHS LTD on October 4, 2024 and sell it today you would lose (0.45) from holding THORNEY TECHS LTD or give up 6.04% of portfolio value over 90 days.

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

Nucor  vs.  THORNEY TECHS LTD

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.

THORNEY TECHS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days THORNEY TECHS LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, THORNEY TECHS 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 THORNEY TECHS

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

The idea behind Nucor and THORNEY TECHS LTD 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.