Correlation Between United States and Nucor

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

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

Diversification Opportunities for United States and Nucor

0.47

Correlation Coefficient

United States  Nucor

Very weak diversification

The 3 months correlation between United and Nucor is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Nucor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor and United States 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 United States Steel are associated (or correlated) with Nucor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nucor has no effect on the direction of United States i.e., United States and Nucor go up and down completely randomly.

Pair Corralation between United States and Nucor

Assuming the 90 days trading horizon United States Steel is expected to generate 0.89 times more return on investment than Nucor. However, United States Steel is 1.12 times less risky than Nucor. It trades about 0.18 of its potential returns per unit of risk. Nucor is currently generating about 0.02 per unit of risk. If you would invest  18,655  in United States Steel on December 24, 2024 and sell it today you would earn a total of  4,095  from holding United States Steel or generate 21.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

United States Steel  vs.  Nucor

United States Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, United States sustained solid returns over the last few months and may actually be approaching a breakup point.

Nucor

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nucor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nucor is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United States and Nucor

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

The idea behind United States Steel and Nucor 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.