Correlation Between NL Industries and Hafnia
Can any of the company-specific risk be diversified away by investing in both NL Industries and Hafnia 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 Hafnia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and Hafnia Limited, you can compare the effects of market volatilities on NL Industries and Hafnia 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 Hafnia. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and Hafnia.
Diversification Opportunities for NL Industries and Hafnia
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NL Industries and Hafnia is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Hafnia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia Limited 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 Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia Limited has no effect on the direction of NL Industries i.e., NL Industries and Hafnia go up and down completely randomly.
Pair Corralation between NL Industries and Hafnia
Allowing for the 90-day total investment horizon NL Industries is expected to under-perform the Hafnia. But the stock apears to be less risky and, when comparing its historical volatility, NL Industries is 1.23 times less risky than Hafnia. The stock trades about -0.02 of its potential returns per unit of risk. The Hafnia Limited is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 499.00 in Hafnia Limited on September 12, 2024 and sell it today you would earn a total of 47.00 from holding Hafnia Limited or generate 9.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NL Industries vs. Hafnia Limited
Performance |
| Timeline |
| NL Industries |
| Hafnia Limited |
NL Industries and Hafnia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NL Industries and Hafnia
The main advantage of trading using opposite NL Industries and Hafnia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries position performs unexpectedly, Hafnia 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 Hafnia will offset losses from the drop in Hafnia's long position.| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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