Correlation Between NIPPON STEEL and Nucor

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

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

Diversification Opportunities for NIPPON STEEL and Nucor

-0.53

Correlation Coefficient

NIPPON STEEL  Nucor

Excellent diversification

The 3 months correlation between NIPPON and Nucor is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding NIPPON STEEL SPADR and Nucor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor and NIPPON STEEL 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 NIPPON STEEL SPADR 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 NIPPON STEEL i.e., NIPPON STEEL and Nucor go up and down completely randomly.

Pair Corralation between NIPPON STEEL and Nucor

Assuming the 90 days trading horizon NIPPON STEEL SPADR is expected to under-perform the Nucor. In addition to that, NIPPON STEEL is 1.81 times more volatile than Nucor. It trades about -0.02 of its total potential returns per unit of risk. Nucor is currently generating about 0.19 per unit of volatility. If you would invest  9,088  in Nucor on April 20, 2025 and sell it today you would earn a total of  3,076  from holding Nucor or generate 33.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

NIPPON STEEL SPADR  vs.  Nucor

NIPPON STEEL SPADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NIPPON STEEL SPADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Nucor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nucor are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nucor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NIPPON STEEL and Nucor

The main advantage of trading using opposite NIPPON STEEL and Nucor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIPPON STEEL 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 NIPPON STEEL SPADR 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.