Correlation Between Nucor and ArcelorMittal

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

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

Diversification Opportunities for Nucor and ArcelorMittal

0.26

Correlation Coefficient

Nucor  ArcelorMittal

Modest diversification

The 3 months correlation between Nucor and ArcelorMittal is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nucor and ArcelorMittal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal and Nucor 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 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 has no effect on the direction of Nucor i.e., Nucor and ArcelorMittal go up and down completely randomly.

Pair Corralation between Nucor and ArcelorMittal

Assuming the 90 days horizon Nucor is expected to under-perform the ArcelorMittal. In addition to that, Nucor is 1.57 times more volatile than ArcelorMittal. It trades about -0.07 of its total potential returns per unit of risk. ArcelorMittal is currently generating about 0.03 per unit of volatility. If you would invest  2,118  in ArcelorMittal on September 23, 2024 and sell it today you would earn a total of  62.00  from holding ArcelorMittal or generate 2.93% return on investment over 90 days.

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

Nucor  vs.  ArcelorMittal

Nucor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nucor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ArcelorMittal

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ArcelorMittal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nucor and ArcelorMittal

The main advantage of trading using opposite Nucor and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nucor 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 and ArcelorMittal 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.