Correlation Between NL Industries and Smart Powerr

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

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

Diversification Opportunities for NL Industries and Smart Powerr

-0.8

Correlation Coefficient

NL Industries  Smart Powerr

Pay attention - limited upside

The 3 months correlation between NL Industries and Smart is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Smart Powerr Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Powerr Corp 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 Smart Powerr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Powerr Corp has no effect on the direction of NL Industries i.e., NL Industries and Smart Powerr go up and down completely randomly.

Pair Corralation between NL Industries and Smart Powerr

Allowing for the 90-day total investment horizon NL Industries is expected to generate 1.21 times more return on investment than Smart Powerr. However, NL Industries is 1.21 times more volatile than Smart Powerr Corp. It trades about 0.01 of its potential returns per unit of risk. Smart Powerr Corp is currently generating about -0.12 per unit of risk. If you would invest  799.00  in NL Industries on August 31, 2024 and sell it today you would lose (4.00) from holding NL Industries or give up 0.5% of portfolio value over 90 days.

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

NL Industries  vs.  Smart Powerr Corp

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 unfluctuating essential indicators, NL Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Smart Powerr Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smart Powerr Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with NL Industries and Smart Powerr

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

The idea behind NL Industries and Smart Powerr Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.