Correlation Between NAPCO Security and NL Industries

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

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

Diversification Opportunities for NAPCO Security and NL Industries

-0.84

Correlation Coefficient

NAPCO Security  NL Industries

Pay attention - limited upside

The 3 months correlation between NAPCO and NL Industries is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding NAPCO Security Technologies and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and NAPCO Security 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 NAPCO Security Technologies 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 NAPCO Security i.e., NAPCO Security and NL Industries go up and down completely randomly.

Pair Corralation between NAPCO Security and NL Industries

Given the investment horizon of 90 days NAPCO Security Technologies is expected to generate 0.56 times more return on investment than NL Industries. However, NAPCO Security Technologies is 1.79 times less risky than NL Industries. It trades about 0.22 of its potential returns per unit of risk. NL Industries is currently generating about -0.21 per unit of risk. If you would invest  2,481  in NAPCO Security Technologies on May 7, 2025 and sell it today you would earn a total of  618.00  from holding NAPCO Security Technologies or generate 24.91% return on investment over 90 days.

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

NAPCO Security Technologies  vs.  NL Industries

NAPCO Security Techn

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NAPCO Security Technologies are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, NAPCO Security exhibited solid returns over the last few months and may actually be approaching a breakup point.

NL Industries

Risk-Adjusted Performance

Weakest

Over the last 90 days NL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in September 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with NAPCO Security and NL Industries

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

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.