Correlation Between NL Industries and CompX International
Can any of the company-specific risk be diversified away by investing in both NL Industries and CompX International 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 CompX International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and CompX International, you can compare the effects of market volatilities on NL Industries and CompX International 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 CompX International. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and CompX International.
Diversification Opportunities for NL Industries and CompX International
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NL Industries and CompX is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and CompX International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompX International 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 CompX International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompX International has no effect on the direction of NL Industries i.e., NL Industries and CompX International go up and down completely randomly.
Pair Corralation between NL Industries and CompX International
Allowing for the 90-day total investment horizon NL Industries is expected to generate 0.62 times more return on investment than CompX International. However, NL Industries is 1.6 times less risky than CompX International. It trades about 0.09 of its potential returns per unit of risk. CompX International is currently generating about 0.05 per unit of risk. If you would invest 458.00 in NL Industries on August 24, 2024 and sell it today you would earn a total of 345.00 from holding NL Industries or generate 75.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NL Industries vs. CompX International
Performance |
| Timeline |
| NL Industries |
| CompX International |
NL Industries and CompX International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NL Industries and CompX International
The main advantage of trading using opposite NL Industries and CompX International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries position performs unexpectedly, CompX International 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 CompX International will offset losses from the drop in CompX International's long position.| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
| CompX International vs. NL Industries | CompX International vs. Eastern Co | CompX International vs. CF Financial | CompX International vs. Bar Harbor Bankshares |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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