Correlation Between NL Industries and Atos SE

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

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

Diversification Opportunities for NL Industries and Atos SE

-0.31

Correlation Coefficient

NL Industries  Atos SE

Very good diversification

The 3 months correlation between NL Industries and Atos is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Atos SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atos SE 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 Atos SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atos SE has no effect on the direction of NL Industries i.e., NL Industries and Atos SE go up and down completely randomly.

Pair Corralation between NL Industries and Atos SE

Allowing for the 90-day total investment horizon NL Industries is expected to generate 72.9 times less return on investment than Atos SE. But when comparing it to its historical volatility, NL Industries is 33.79 times less risky than Atos SE. It trades about 0.07 of its potential returns per unit of risk. Atos SE is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  75.00  in Atos SE on September 2, 2024 and sell it today you would lose (5.00) from holding Atos SE or give up 6.67% of portfolio value over 90 days.

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

NL Industries  vs.  Atos SE

NL Industries

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, NL Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Atos SE

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Atos SE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Atos SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NL Industries and Atos SE

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

The idea behind NL Industries and Atos SE 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.