Correlation Between NL Industries and Weyco
Can any of the company-specific risk be diversified away by investing in both NL Industries and Weyco 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 Weyco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and Weyco Group, you can compare the effects of market volatilities on NL Industries and Weyco 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 Weyco. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and Weyco.
Diversification Opportunities for NL Industries and Weyco
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NL Industries and Weyco is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Weyco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weyco Group 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 Weyco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weyco Group has no effect on the direction of NL Industries i.e., NL Industries and Weyco go up and down completely randomly.
Pair Corralation between NL Industries and Weyco
Allowing for the 90-day total investment horizon NL Industries is expected to generate 1.05 times less return on investment than Weyco. But when comparing it to its historical volatility, NL Industries is 1.36 times less risky than Weyco. It trades about 0.11 of its potential returns per unit of risk. Weyco Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,344 in Weyco Group on September 1, 2024 and sell it today you would earn a total of 227.00 from holding Weyco Group or generate 6.79% 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. Weyco Group
Performance |
| Timeline |
| NL Industries |
| Weyco Group |
NL Industries and Weyco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NL Industries and Weyco
The main advantage of trading using opposite NL Industries and Weyco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries position performs unexpectedly, Weyco 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 Weyco will offset losses from the drop in Weyco's long position.| NL Industries vs. Atos SE | NL Industries vs. Deveron Corp | NL Industries vs. Appen Limited | NL Industries vs. Atos Origin 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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