Correlation Between NL Industries and Flexible Solutions
Can any of the company-specific risk be diversified away by investing in both NL Industries and Flexible Solutions 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 Flexible Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and Flexible Solutions International, you can compare the effects of market volatilities on NL Industries and Flexible Solutions 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 Flexible Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and Flexible Solutions.
Diversification Opportunities for NL Industries and Flexible Solutions
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NL Industries and Flexible is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions 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 Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of NL Industries i.e., NL Industries and Flexible Solutions go up and down completely randomly.
Pair Corralation between NL Industries and Flexible Solutions
Allowing for the 90-day total investment horizon NL Industries is expected to generate 2.24 times less return on investment than Flexible Solutions. But when comparing it to its historical volatility, NL Industries is 1.22 times less risky than Flexible Solutions. It trades about 0.02 of its potential returns per unit of risk. Flexible Solutions International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 394.00 in Flexible Solutions International on August 24, 2024 and sell it today you would earn a total of 8.00 from holding Flexible Solutions International or generate 2.03% 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. Flexible Solutions Internation
Performance |
| Timeline |
| NL Industries |
| Flexible Solutions |
NL Industries and Flexible Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NL Industries and Flexible Solutions
The main advantage of trading using opposite NL Industries and Flexible Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries position performs unexpectedly, Flexible Solutions 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 Flexible Solutions will offset losses from the drop in Flexible Solutions' long position.| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
| Flexible Solutions vs. Eshallgo Class A | Flexible Solutions vs. Amtech Systems | Flexible Solutions vs. Gold Fields Ltd | Flexible Solutions vs. Aegean Airlines SA |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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