Correlation Between NL Industries and BRC
Can any of the company-specific risk be diversified away by investing in both NL Industries and BRC 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 BRC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and BRC Inc, you can compare the effects of market volatilities on NL Industries and BRC 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 BRC. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and BRC.
Diversification Opportunities for NL Industries and BRC
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NL Industries and BRC is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and BRC Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRC Inc 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 BRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRC Inc has no effect on the direction of NL Industries i.e., NL Industries and BRC go up and down completely randomly.
Pair Corralation between NL Industries and BRC
Allowing for the 90-day total investment horizon NL Industries is expected to under-perform the BRC. But the stock apears to be less risky and, when comparing its historical volatility, NL Industries is 1.27 times less risky than BRC. The stock trades about -0.02 of its potential returns per unit of risk. The BRC Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 298.00 in BRC Inc on September 12, 2024 and sell it today you would lose (1.00) from holding BRC Inc or give up 0.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NL Industries vs. BRC Inc
Performance |
| Timeline |
| NL Industries |
| BRC Inc |
NL Industries and BRC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NL Industries and BRC
The main advantage of trading using opposite NL Industries and BRC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries position performs unexpectedly, BRC 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 BRC will offset losses from the drop in BRC's long position.| 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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