Correlation Between NL Industries and International Consolidated

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

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

Diversification Opportunities for NL Industries and International Consolidated

-0.41

Correlation Coefficient

NL Industries  International Consolidated

Very good diversification

The 3 months correlation between NL Industries and International is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and International Consolidated Com in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated 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 International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of NL Industries i.e., NL Industries and International Consolidated go up and down completely randomly.

Pair Corralation between NL Industries and International Consolidated

Allowing for the 90-day total investment horizon NL Industries is expected to generate 204.54 times less return on investment than International Consolidated. But when comparing it to its historical volatility, NL Industries is 79.38 times less risky than International Consolidated. It trades about 0.09 of its potential returns per unit of risk. International Consolidated Companies is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  20.00  in International Consolidated Companies on September 23, 2024 and sell it today you would lose (17.58) from holding International Consolidated Companies or give up 87.9% of portfolio value over 90 days.

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

NL Industries  vs.  International Consolidated Com

NL Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 7 (%) 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.

International Consolidated

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Companies are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, International Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NL Industries and International Consolidated

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

The idea behind NL Industries and International Consolidated Companies 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.