Correlation Between All American and NL Industries

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

By analyzing existing cross correlation between All American Pet and NL Industries, you can compare the effects of market volatilities on All American 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 All American with a short position of NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of All American and NL Industries.

Diversification Opportunities for All American and NL Industries

0.0

Correlation Coefficient

All American  NL Industries

Pay attention - limited upside

The 3 months correlation between All and NL Industries is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding All American Pet and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and All American 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 All American Pet 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 All American i.e., All American and NL Industries go up and down completely randomly.

Pair Corralation between All American and NL Industries

If you would invest  800.00  in NL Industries on September 26, 2024 and sell it today you would lose (5.00) from holding NL Industries or give up 0.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

All American Pet  vs.  NL Industries

All American Pet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days All American Pet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, All American is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

NL Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, NL Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with All American and NL Industries

The main advantage of trading using opposite All American and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if All American 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.

The idea behind All American Pet and NL Industries 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.