Correlation Between NL Industries and Dun Bradstreet

Can any of the company-specific risk be diversified away by investing in both NL Industries and Dun Bradstreet 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 Dun Bradstreet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NL Industries and Dun Bradstreet Holdings, you can compare the effects of market volatilities on NL Industries and Dun Bradstreet 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 Dun Bradstreet. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and Dun Bradstreet.

Diversification Opportunities for NL Industries and Dun Bradstreet

-0.87

Correlation Coefficient

NL Industries  Dun Bradstreet

Pay attention - limited upside

The 3 months correlation between NL Industries and Dun is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Dun Bradstreet Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dun Bradstreet 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 Dun Bradstreet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dun Bradstreet Holdings has no effect on the direction of NL Industries i.e., NL Industries and Dun Bradstreet go up and down completely randomly.

Pair Corralation between NL Industries and Dun Bradstreet

Allowing for the 90-day total investment horizon NL Industries is expected to generate 1.7 times less return on investment than Dun Bradstreet. In addition to that, NL Industries is 1.48 times more volatile than Dun Bradstreet Holdings. It trades about 0.02 of its total potential returns per unit of risk. Dun Bradstreet Holdings is currently generating about 0.05 per unit of volatility. If you would invest  957.00  in Dun Bradstreet Holdings on February 4, 2024 and sell it today you would earn a total of  15.00  from holding Dun Bradstreet Holdings or generate 1.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

NL Industries  vs.  Dun Bradstreet Holdings

NL Industries

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, NL Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Dun Bradstreet Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dun Bradstreet Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with NL Industries and Dun Bradstreet

The main advantage of trading using opposite NL Industries and Dun Bradstreet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries position performs unexpectedly, Dun Bradstreet 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 Dun Bradstreet will offset losses from the drop in Dun Bradstreet's long position.

The idea behind NL Industries and Dun Bradstreet Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.