Correlation Between Kobe Steel and Nucor Corp

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

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

Diversification Opportunities for Kobe Steel and Nucor Corp

-0.2

Correlation Coefficient

Kobe Steel  Nucor Corp

Good diversification

The 3 months correlation between Kobe and Nucor is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Kobe Steel and Nucor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor Corp and Kobe 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 Kobe Steel 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 Kobe Steel i.e., Kobe Steel and Nucor Corp go up and down completely randomly.

Pair Corralation between Kobe Steel and Nucor Corp

If you would invest  1,320  in Kobe Steel on February 1, 2024 and sell it today you would earn a total of  0.00  from holding Kobe Steel or generate 0.0% return on investment over 90 days.

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

Kobe Steel  vs.  Nucor Corp

Kobe Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kobe Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kobe Steel is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Kobe Steel and Nucor Corp

The main advantage of trading using opposite Kobe Steel and Nucor Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kobe Steel 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 Kobe Steel 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.