Correlation Between Nucor Corp and Olympic Steel

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

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

Diversification Opportunities for Nucor Corp and Olympic Steel

0.66

Correlation Coefficient

Nucor Corp  Olympic Steel

Poor diversification

The 3 months correlation between Nucor and Olympic is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Nucor Corp and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel 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 Olympic Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olympic Steel has no effect on the direction of Nucor Corp i.e., Nucor Corp and Olympic Steel go up and down completely randomly.

Pair Corralation between Nucor Corp and Olympic Steel

Considering the 90-day investment horizon Nucor Corp is expected to generate 0.7 times more return on investment than Olympic Steel. However, Nucor Corp is 1.43 times less risky than Olympic Steel. It trades about -0.03 of its potential returns per unit of risk. Olympic Steel is currently generating about -0.04 per unit of risk. If you would invest  16,934  in Nucor Corp on July 26, 2024 and sell it today you would lose (2,768) from holding Nucor Corp or give up 16.35% of portfolio value over 90 days.

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

Nucor Corp  vs.  Olympic Steel

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 latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Olympic Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Olympic Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in November 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Nucor Corp and Olympic Steel

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

The idea behind Nucor Corp and Olympic Steel 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.

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..