Correlation Between Nucor Corp and Exxon

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

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

Diversification Opportunities for Nucor Corp and Exxon

0.76

Correlation Coefficient

Nucor Corp  Exxon

Poor diversification

The 3 months correlation between Nucor and Exxon is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Nucor Corp and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of Nucor Corp i.e., Nucor Corp and Exxon go up and down completely randomly.

Pair Corralation between Nucor Corp and Exxon

Considering the 90-day investment horizon Nucor Corp is expected to under-perform the Exxon. In addition to that, Nucor Corp is 2.7 times more volatile than Exxon Mobil Corp. It trades about -0.24 of its total potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.38 per unit of volatility. If you would invest  11,379  in Exxon Mobil Corp on January 26, 2024 and sell it today you would earn a total of  726.00  from holding Exxon Mobil Corp or generate 6.38% return on investment over 90 days.

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

Nucor Corp  vs.  Exxon Mobil Corp

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Exxon Mobil Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Exxon displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nucor Corp and Exxon

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

The idea behind Nucor Corp and Exxon Mobil 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.