Correlation Between Nucor Corp and Occidental Petroleum

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Can any of the company-specific risk be diversified away by investing in both Nucor Corp and Occidental Petroleum 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 Occidental Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nucor Corp and Occidental Petroleum Corp, you can compare the effects of market volatilities on Nucor Corp and Occidental Petroleum 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 Occidental Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nucor Corp and Occidental Petroleum.

Diversification Opportunities for Nucor Corp and Occidental Petroleum

0.66
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Nucor Corp and Occidental Petroleum

Considering the 90-day investment horizon Nucor Corp is expected to generate 2.09 times less return on investment than Occidental Petroleum. But when comparing it to its historical volatility, Nucor Corp is 1.44 times less risky than Occidental Petroleum. It trades about 0.07 of its potential returns per unit of risk. Occidental Petroleum Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,011  in Occidental Petroleum Corp on June 28, 2022 and sell it today you would earn a total of  4,777  from holding Occidental Petroleum Corp or generate 472.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Nucor Corp  vs.  Occidental Petroleum Corp

 Performance (%) 
       Timeline  
Nucor Corp 
Nucor Performance
0 of 100
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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Nucor Price Channel

Occidental Petroleum Corp 
Occidental Performance
0 of 100
Over the last 90 days Occidental Petroleum Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Occidental Petroleum is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Occidental Price Channel

Nucor Corp and Occidental Petroleum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nucor Corp and Occidental Petroleum

The main advantage of trading using opposite Nucor Corp and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nucor Corp position performs unexpectedly, Occidental Petroleum 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 Occidental Petroleum will offset losses from the drop in Occidental Petroleum's long position.
Nucor Corp vs. Kibush Capital Corp
The idea behind Nucor Corp and Occidental Petroleum 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.
Occidental Petroleum vs. Clearwater Paper Corp
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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