Correlation Between NL Industries and Aker BP
Can any of the company-specific risk be diversified away by investing in both NL Industries and Aker BP 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 NL Industries and Aker BP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and Aker BP ASA, you can compare the effects of market volatilities on NL Industries and Aker BP 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 NL Industries with a short position of Aker BP. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and Aker BP.
Diversification Opportunities for NL Industries and Aker BP
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between NL Industries and Aker is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Aker BP ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker BP ASA and NL Industries 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 NL Industries are associated (or correlated) with Aker BP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker BP ASA has no effect on the direction of NL Industries i.e., NL Industries and Aker BP go up and down completely randomly.
Pair Corralation between NL Industries and Aker BP
Allowing for the 90-day total investment horizon NL Industries is expected to generate 6.68 times less return on investment than Aker BP. But when comparing it to its historical volatility, NL Industries is 1.43 times less risky than Aker BP. It trades about 0.02 of its potential returns per unit of risk. Aker BP ASA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 956.00 in Aker BP ASA on November 3, 2024 and sell it today you would earn a total of 86.00 from holding Aker BP ASA or generate 9.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NL Industries vs. Aker BP ASA
Performance |
| Timeline |
| NL Industries |
| Aker BP ASA |
NL Industries and Aker BP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NL Industries and Aker BP
The main advantage of trading using opposite NL Industries and Aker BP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries position performs unexpectedly, Aker BP 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 Aker BP will offset losses from the drop in Aker BP's long position.| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
| Aker BP vs. Universal Electronics | Aker BP vs. VOXX International | Aker BP vs. Sony Group Corp | Aker BP vs. TCL Electronics Holdings |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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