Correlation Between BBB Foods and NL Industries
Can any of the company-specific risk be diversified away by investing in both BBB Foods and NL Industries 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 BBB Foods and NL Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBB Foods and NL Industries, you can compare the effects of market volatilities on BBB Foods and NL Industries 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 BBB Foods with a short position of NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBB Foods and NL Industries.
Diversification Opportunities for BBB Foods and NL Industries
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BBB and NL Industries is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and BBB Foods 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 BBB Foods are associated (or correlated) with NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of BBB Foods i.e., BBB Foods and NL Industries go up and down completely randomly.
Pair Corralation between BBB Foods and NL Industries
Given the investment horizon of 90 days BBB Foods is expected to under-perform the NL Industries. But the stock apears to be less risky and, when comparing its historical volatility, BBB Foods is 1.04 times less risky than NL Industries. The stock trades about -0.02 of its potential returns per unit of risk. The NL Industries is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 634.00 in NL Industries on September 2, 2024 and sell it today you would earn a total of 161.00 from holding NL Industries or generate 25.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BBB Foods vs. NL Industries
Performance |
| Timeline |
| BBB Foods |
| NL Industries |
BBB Foods and NL Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BBB Foods and NL Industries
The main advantage of trading using opposite BBB Foods and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBB Foods position performs unexpectedly, NL Industries 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 NL Industries will offset losses from the drop in NL Industries' long position.| BBB Foods vs. Vita Coco | BBB Foods vs. Independence Realty Trust | BBB Foods vs. Inflection Point Acquisition | BBB Foods vs. Anheuser Busch Inbev |
| 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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