Correlation Between LENSAR and NL Industries
Can any of the company-specific risk be diversified away by investing in both LENSAR 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 LENSAR and NL Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LENSAR Inc and NL Industries, you can compare the effects of market volatilities on LENSAR 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 LENSAR with a short position of NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of LENSAR and NL Industries.
Diversification Opportunities for LENSAR and NL Industries
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LENSAR and NL Industries is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding LENSAR Inc and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and LENSAR 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 LENSAR Inc 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 LENSAR i.e., LENSAR and NL Industries go up and down completely randomly.
Pair Corralation between LENSAR and NL Industries
Given the investment horizon of 90 days LENSAR Inc is expected to generate 1.79 times more return on investment than NL Industries. However, LENSAR is 1.79 times more volatile than NL Industries. It trades about 0.06 of its potential returns per unit of risk. NL Industries is currently generating about 0.04 per unit of risk. If you would invest 317.00 in LENSAR Inc on August 24, 2024 and sell it today you would earn a total of 421.00 from holding LENSAR Inc or generate 132.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LENSAR Inc vs. NL Industries
Performance |
| Timeline |
| LENSAR Inc |
| NL Industries |
LENSAR and NL Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LENSAR and NL Industries
The main advantage of trading using opposite LENSAR and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LENSAR 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.The idea behind LENSAR Inc and NL Industries 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.| 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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