Correlation Between NL Industries and NI Holdings
Can any of the company-specific risk be diversified away by investing in both NL Industries and NI Holdings 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 NI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and NI Holdings, you can compare the effects of market volatilities on NL Industries and NI Holdings 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 NI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and NI Holdings.
Diversification Opportunities for NL Industries and NI Holdings
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NL Industries and NODK is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and NI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NI Holdings 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 NI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NI Holdings has no effect on the direction of NL Industries i.e., NL Industries and NI Holdings go up and down completely randomly.
Pair Corralation between NL Industries and NI Holdings
Allowing for the 90-day total investment horizon NL Industries is expected to generate 1.57 times more return on investment than NI Holdings. However, NL Industries is 1.57 times more volatile than NI Holdings. It trades about 0.04 of its potential returns per unit of risk. NI Holdings is currently generating about 0.03 per unit of risk. If you would invest 593.00 in NL Industries on August 24, 2024 and sell it today you would earn a total of 218.00 from holding NL Industries or generate 36.76% 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. NI Holdings
Performance |
| Timeline |
| NL Industries |
| NI Holdings |
NL Industries and NI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NL Industries and NI Holdings
The main advantage of trading using opposite NL Industries and NI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries position performs unexpectedly, NI Holdings 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 NI Holdings will offset losses from the drop in NI Holdings' long position.| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
| NI Holdings vs. Horace Mann Educators | NI Holdings vs. Donegal Group A | NI Holdings vs. Global Indemnity PLC | NI Holdings vs. Selective Insurance 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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