Correlation Between Wheaton Precious and Nucor Corp

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

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

Diversification Opportunities for Wheaton Precious and Nucor Corp

0.77

Correlation Coefficient

Wheaton Precious  Nucor Corp

Poor diversification

The 3 months correlation between Wheaton and Nucor is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals and Nucor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor Corp and Wheaton Precious 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 Wheaton Precious Metals 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 Wheaton Precious i.e., Wheaton Precious and Nucor Corp go up and down completely randomly.

Pair Corralation between Wheaton Precious and Nucor Corp

Considering the 90-day investment horizon Wheaton Precious Metals is expected to generate 0.83 times more return on investment than Nucor Corp. However, Wheaton Precious Metals is 1.21 times less risky than Nucor Corp. It trades about 0.3 of its potential returns per unit of risk. Nucor Corp is currently generating about 0.11 per unit of risk. If you would invest  5,690  in Wheaton Precious Metals on December 19, 2024 and sell it today you would earn a total of  1,863  from holding Wheaton Precious Metals or generate 32.74% return on investment over 90 days.

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

Wheaton Precious Metals  vs.  Nucor Corp

Wheaton Precious Metals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Wheaton Precious displayed solid returns over the last few months and may actually be approaching a breakup point.

Nucor Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nucor Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Nucor Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wheaton Precious and Nucor Corp

The main advantage of trading using opposite Wheaton Precious and Nucor Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wheaton Precious 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 Wheaton Precious Metals 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.