Correlation Between NL Industries and Steel Partners
Can any of the company-specific risk be diversified away by investing in both NL Industries and Steel Partners 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 Steel Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and Steel Partners Holdings, you can compare the effects of market volatilities on NL Industries and Steel Partners 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 Steel Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and Steel Partners.
Diversification Opportunities for NL Industries and Steel Partners
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NL Industries and Steel is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Steel Partners Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Partners 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 Steel Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Partners Holdings has no effect on the direction of NL Industries i.e., NL Industries and Steel Partners go up and down completely randomly.
Pair Corralation between NL Industries and Steel Partners
Allowing for the 90-day total investment horizon NL Industries is expected to generate 50.97 times more return on investment than Steel Partners. However, NL Industries is 50.97 times more volatile than Steel Partners Holdings. It trades about 0.06 of its potential returns per unit of risk. Steel Partners Holdings is currently generating about 0.37 per unit of risk. If you would invest 782.00 in NL Industries on August 28, 2024 and sell it today you would earn a total of 26.00 from holding NL Industries or generate 3.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
NL Industries vs. Steel Partners Holdings
Performance |
| Timeline |
| NL Industries |
| Steel Partners Holdings |
NL Industries and Steel Partners Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NL Industries and Steel Partners
The main advantage of trading using opposite NL Industries and Steel Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries position performs unexpectedly, Steel Partners 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 Steel Partners will offset losses from the drop in Steel Partners' long position.| NL Industries vs. Park Electrochemical | NL Industries vs. Innovative Solutions and | NL Industries vs. Curtiss Wright | NL Industries vs. National Presto Industries |
| Steel Partners vs. Compass Diversified | Steel Partners vs. Brookfield Business Partners | Steel Partners vs. Matthews International | Steel Partners vs. Tejon Ranch Co |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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