Correlation Between Nucor Corp and Cleveland Cliffs

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

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

Diversification Opportunities for Nucor Corp and Cleveland Cliffs

0.95

Correlation Coefficient

Nucor Corp  Cleveland Cliffs

Almost no diversification

The 3 months correlation between Nucor and Cleveland is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Nucor Corp and Cleveland Cliffs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleveland Cliffs and Nucor Corp 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 Corp are associated (or correlated) with Cleveland Cliffs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleveland Cliffs has no effect on the direction of Nucor Corp i.e., Nucor Corp and Cleveland Cliffs go up and down completely randomly.

Pair Corralation between Nucor Corp and Cleveland Cliffs

Considering the 90-day investment horizon Nucor Corp is expected to generate 0.72 times more return on investment than Cleveland Cliffs. However, Nucor Corp is 1.4 times less risky than Cleveland Cliffs. It trades about 0.09 of its potential returns per unit of risk. Cleveland Cliffs is currently generating about 0.06 per unit of risk. If you would invest  10,092  in Nucor Corp on January 19, 2024 and sell it today you would earn a total of  8,985  from holding Nucor Corp or generate 89.03% return on investment over 90 days.

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

Nucor Corp  vs.  Cleveland Cliffs

Nucor Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nucor Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Nucor Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Cleveland Cliffs

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cleveland Cliffs are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Cleveland Cliffs reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nucor Corp and Cleveland Cliffs

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

The idea behind Nucor Corp and Cleveland Cliffs 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.