Correlation Between Nucor Corp and ArcelorMittal

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

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

Diversification Opportunities for Nucor Corp and ArcelorMittal

0.09

Correlation Coefficient

Nucor Corp  ArcelorMittal

Significant diversification

The 3 months correlation between Nucor and ArcelorMittal is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Nucor Corp and ArcelorMittal SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA ADR 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA ADR has no effect on the direction of Nucor Corp i.e., Nucor Corp and ArcelorMittal go up and down completely randomly.

Pair Corralation between Nucor Corp and ArcelorMittal

Considering the 90-day investment horizon Nucor Corp is expected to under-perform the ArcelorMittal. In addition to that, Nucor Corp is 1.11 times more volatile than ArcelorMittal SA ADR. It trades about -0.25 of its total potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about -0.17 per unit of volatility. If you would invest  2,709  in ArcelorMittal SA ADR on January 25, 2024 and sell it today you would lose (189.00) from holding ArcelorMittal SA ADR or give up 6.98% of portfolio value over 90 days.

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

Nucor Corp  vs.  ArcelorMittal SA ADR

Nucor Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nucor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Nucor Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

ArcelorMittal SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ArcelorMittal SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Nucor Corp and ArcelorMittal

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

The idea behind Nucor Corp and ArcelorMittal SA ADR 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.