Correlation Between NL Industries and Chemours
Can any of the company-specific risk be diversified away by investing in both NL Industries and Chemours 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 Chemours into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and Chemours Co, you can compare the effects of market volatilities on NL Industries and Chemours 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 Chemours. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and Chemours.
Diversification Opportunities for NL Industries and Chemours
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NL Industries and Chemours is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Chemours Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemours 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 Chemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemours has no effect on the direction of NL Industries i.e., NL Industries and Chemours go up and down completely randomly.
Pair Corralation between NL Industries and Chemours
Allowing for the 90-day total investment horizon NL Industries is expected to generate 4.22 times less return on investment than Chemours. But when comparing it to its historical volatility, NL Industries is 1.1 times less risky than Chemours. It trades about 0.06 of its potential returns per unit of risk. Chemours Co is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,824 in Chemours Co on August 28, 2024 and sell it today you would earn a total of 370.00 from holding Chemours Co or generate 20.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NL Industries vs. Chemours Co
Performance |
| Timeline |
| NL Industries |
| Chemours |
NL Industries and Chemours Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NL Industries and Chemours
The main advantage of trading using opposite NL Industries and Chemours positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries position performs unexpectedly, Chemours 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 Chemours will offset losses from the drop in Chemours' long position.| NL Industries vs. Park Electrochemical | NL Industries vs. Innovative Solutions and | NL Industries vs. Curtiss Wright | NL Industries vs. National Presto Industries |
| Chemours vs. Olin Corporation | Chemours vs. Cabot | Chemours vs. Kronos Worldwide | Chemours vs. LyondellBasell Industries NV |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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