Correlation Between Ta Chen and Nucor Corp

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

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

Diversification Opportunities for Ta Chen and Nucor Corp

0.62

Correlation Coefficient

Ta Chen  Nucor Corp

Poor diversification

The 3 months correlation between 2027 and Nucor is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ta Chen Stainless and Nucor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor Corp and Ta Chen 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 Ta Chen Stainless are associated (or correlated) with Nucor Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nucor Corp has no effect on the direction of Ta Chen i.e., Ta Chen and Nucor Corp go up and down completely randomly.

Pair Corralation between Ta Chen and Nucor Corp

Assuming the 90 days trading horizon Ta Chen Stainless is expected to generate 0.72 times more return on investment than Nucor Corp. However, Ta Chen Stainless is 1.39 times less risky than Nucor Corp. It trades about 0.01 of its potential returns per unit of risk. Nucor Corp is currently generating about -0.01 per unit of risk. If you would invest  3,305  in Ta Chen Stainless on September 13, 2024 and sell it today you would lose (5.00) from holding Ta Chen Stainless or give up 0.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Ta Chen Stainless  vs.  Nucor Corp

Ta Chen Stainless

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ta Chen Stainless has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ta Chen is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with Ta Chen and Nucor Corp

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

The idea behind Ta Chen Stainless and Nucor 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 Transaction History module to view history of all your transactions and understand their impact on performance.