Correlation Between NL Industries and Nasdaq
Can any of the company-specific risk be diversified away by investing in both NL Industries and Nasdaq 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 Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and Nasdaq Inc, you can compare the effects of market volatilities on NL Industries and Nasdaq 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 Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and Nasdaq.
Diversification Opportunities for NL Industries and Nasdaq
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NL Industries and Nasdaq is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc 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 Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of NL Industries i.e., NL Industries and Nasdaq go up and down completely randomly.
Pair Corralation between NL Industries and Nasdaq
Allowing for the 90-day total investment horizon NL Industries is expected to generate 1.67 times less return on investment than Nasdaq. In addition to that, NL Industries is 3.63 times more volatile than Nasdaq Inc. It trades about 0.06 of its total potential returns per unit of risk. Nasdaq Inc is currently generating about 0.36 per unit of volatility. If you would invest 7,534 in Nasdaq Inc on August 28, 2024 and sell it today you would earn a total of 618.00 from holding Nasdaq Inc or generate 8.2% 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. Nasdaq Inc
Performance |
| Timeline |
| NL Industries |
| Nasdaq Inc |
NL Industries and Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NL Industries and Nasdaq
The main advantage of trading using opposite NL Industries and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries position performs unexpectedly, Nasdaq 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 Nasdaq will offset losses from the drop in Nasdaq'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 |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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