Correlation Between Reliance Steel and Nucor Corp

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

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

Diversification Opportunities for Reliance Steel and Nucor Corp

0.81

Correlation Coefficient

Reliance Steel  Nucor Corp

Very poor diversification

The 3 months correlation between Reliance and Nucor is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Nucor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor Corp and Reliance Steel 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 Reliance Steel Aluminum are associated (or correlated) with Nucor Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nucor Corp has no effect on the direction of Reliance Steel i.e., Reliance Steel and Nucor Corp go up and down completely randomly.

Pair Corralation between Reliance Steel and Nucor Corp

Allowing for the 90-day total investment horizon Reliance Steel is expected to generate 1.05 times less return on investment than Nucor Corp. But when comparing it to its historical volatility, Reliance Steel Aluminum is 1.53 times less risky than Nucor Corp. It trades about 0.13 of its potential returns per unit of risk. Nucor Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  11,531  in Nucor Corp on December 28, 2024 and sell it today you would earn a total of  1,216  from holding Nucor Corp or generate 10.55% return on investment over 90 days.

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

Reliance Steel Aluminum  vs.  Nucor Corp

Reliance Steel Aluminum

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Reliance Steel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nucor Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nucor Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Nucor Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Reliance Steel and Nucor Corp

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

The idea behind Reliance Steel Aluminum and Nucor Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.