Correlation Between NL Industries and Aqua Metals

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

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

Diversification Opportunities for NL Industries and Aqua Metals

-0.53

Correlation Coefficient

NL Industries  Aqua Metals

Excellent diversification

The 3 months correlation between NL Industries and Aqua is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Aqua Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua Metals 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 Aqua Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua Metals has no effect on the direction of NL Industries i.e., NL Industries and Aqua Metals go up and down completely randomly.

Pair Corralation between NL Industries and Aqua Metals

Allowing for the 90-day total investment horizon NL Industries is expected to generate 0.49 times more return on investment than Aqua Metals. However, NL Industries is 2.05 times less risky than Aqua Metals. It trades about 0.06 of its potential returns per unit of risk. Aqua Metals is currently generating about -0.07 per unit of risk. If you would invest  497.00  in NL Industries on September 30, 2024 and sell it today you would earn a total of  301.00  from holding NL Industries or generate 60.56% return on investment over 90 days.

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

NL Industries  vs.  Aqua Metals

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 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aqua Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqua Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with NL Industries and Aqua Metals

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

The idea behind NL Industries and Aqua Metals 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..