Correlation Between NL Industries and CoreCivic
Can any of the company-specific risk be diversified away by investing in both NL Industries and CoreCivic 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 CoreCivic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and CoreCivic, you can compare the effects of market volatilities on NL Industries and CoreCivic 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 CoreCivic. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and CoreCivic.
Diversification Opportunities for NL Industries and CoreCivic
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NL Industries and CoreCivic is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and CoreCivic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoreCivic 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 CoreCivic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoreCivic has no effect on the direction of NL Industries i.e., NL Industries and CoreCivic go up and down completely randomly.
Pair Corralation between NL Industries and CoreCivic
Allowing for the 90-day total investment horizon NL Industries is expected to generate 30.93 times less return on investment than CoreCivic. But when comparing it to its historical volatility, NL Industries is 2.23 times less risky than CoreCivic. It trades about 0.02 of its potential returns per unit of risk. CoreCivic is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,445 in CoreCivic on August 29, 2024 and sell it today you would earn a total of 749.00 from holding CoreCivic or generate 51.83% 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. CoreCivic
Performance |
| Timeline |
| NL Industries |
| CoreCivic |
NL Industries and CoreCivic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NL Industries and CoreCivic
The main advantage of trading using opposite NL Industries and CoreCivic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries position performs unexpectedly, CoreCivic 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 CoreCivic will offset losses from the drop in CoreCivic's long position.| NL Industries vs. Park Electrochemical | NL Industries vs. Innovative Solutions and | NL Industries vs. Curtiss Wright | NL Industries vs. National Presto Industries |
| CoreCivic vs. ADT Inc | CoreCivic vs. NL Industries | CoreCivic vs. Mistras Group | CoreCivic vs. Evolv Technologies 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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