Correlation Between NL Industries and Expand Energy
Can any of the company-specific risk be diversified away by investing in both NL Industries and Expand Energy 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 Expand Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and Expand Energy, you can compare the effects of market volatilities on NL Industries and Expand Energy 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 Expand Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and Expand Energy.
Diversification Opportunities for NL Industries and Expand Energy
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NL Industries and Expand is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Expand Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expand Energy 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 Expand Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expand Energy has no effect on the direction of NL Industries i.e., NL Industries and Expand Energy go up and down completely randomly.
Pair Corralation between NL Industries and Expand Energy
Allowing for the 90-day total investment horizon NL Industries is expected to generate 1.54 times more return on investment than Expand Energy. However, NL Industries is 1.54 times more volatile than Expand Energy. It trades about 0.03 of its potential returns per unit of risk. Expand Energy is currently generating about 0.02 per unit of risk. If you would invest 597.00 in NL Industries on September 3, 2024 and sell it today you would earn a total of 198.00 from holding NL Industries or generate 33.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NL Industries vs. Expand Energy
Performance |
| Timeline |
| NL Industries |
| Expand Energy |
NL Industries and Expand Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NL Industries and Expand Energy
The main advantage of trading using opposite NL Industries and Expand Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries position performs unexpectedly, Expand Energy 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 Expand Energy will offset losses from the drop in Expand Energy's long position.| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
| Expand Energy vs. Turning Point Brands | Expand Energy vs. Lipocine | Expand Energy vs. HUTCHMED DRC | Expand Energy vs. Willamette Valley Vineyards |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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