Correlation Between All American and NL Industries
Can any of the company-specific risk be diversified away by investing in both All American and NL Industries 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 All American and NL Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between All American Pet and NL Industries, you can compare the effects of market volatilities on All American and NL Industries 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 All American with a short position of NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of All American and NL Industries.
Diversification Opportunities for All American and NL Industries
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between All and NL Industries is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding All American Pet and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and All American 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 All American Pet are associated (or correlated) with NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of All American i.e., All American and NL Industries go up and down completely randomly.
Pair Corralation between All American and NL Industries
Given the investment horizon of 90 days All American Pet is expected to under-perform the NL Industries. In addition to that, All American is 9.38 times more volatile than NL Industries. It trades about -0.24 of its total potential returns per unit of risk. NL Industries is currently generating about -0.08 per unit of volatility. If you would invest 779.00 in NL Industries on October 13, 2024 and sell it today you would lose (33.00) from holding NL Industries or give up 4.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
All American Pet vs. NL Industries
Performance |
| Timeline |
| All American Pet |
| NL Industries |
All American and NL Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with All American and NL Industries
The main advantage of trading using opposite All American and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if All American position performs unexpectedly, NL Industries 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 NL Industries will offset losses from the drop in NL Industries' long position.| All American vs. International Consolidated Companies | All American vs. Frontera Group | All American vs. XCPCNL Business Services | All American vs. Aramark Holdings |
| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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