Correlation Between Nucor Corp and Commercial Metals

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

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

Diversification Opportunities for Nucor Corp and Commercial Metals

0.89

Correlation Coefficient

Nucor Corp  Commercial Metals

Very poor diversification

The 3 months correlation between Nucor and Commercial is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Nucor Corp and Commercial Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial Metals 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 Commercial Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial Metals has no effect on the direction of Nucor Corp i.e., Nucor Corp and Commercial Metals go up and down completely randomly.

Pair Corralation between Nucor Corp and Commercial Metals

Considering the 90-day investment horizon Nucor Corp is expected to under-perform the Commercial Metals. In addition to that, Nucor Corp is 1.03 times more volatile than Commercial Metals. It trades about -0.02 of its total potential returns per unit of risk. Commercial Metals is currently generating about 0.0 per unit of volatility. If you would invest  4,745  in Commercial Metals on February 2, 2025 and sell it today you would lose (98.00) from holding Commercial Metals or give up 2.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Nucor Corp  vs.  Commercial Metals

Nucor Corp

Risk-Adjusted Performance

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.

Commercial Metals

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Nucor Corp and Commercial Metals

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

The idea behind Nucor Corp and Commercial Metals 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.