Correlation Between NL Industries and Banco Ita

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

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

Diversification Opportunities for NL Industries and Banco Ita

0.49

Correlation Coefficient

NL Industries  Banco Ita

Very weak diversification

The 3 months correlation between NL Industries and Banco is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Banco Ita Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Ita Chile 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 Banco Ita. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Ita Chile has no effect on the direction of NL Industries i.e., NL Industries and Banco Ita go up and down completely randomly.

Pair Corralation between NL Industries and Banco Ita

If you would invest  676.00  in NL Industries on September 16, 2024 and sell it today you would earn a total of  152.00  from holding NL Industries or generate 22.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.54%
Values	Daily Returns

NL Industries  vs.  Banco Ita Chile

NL Industries

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 9 (%) 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.

Banco Ita Chile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Ita Chile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Banco Ita is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with NL Industries and Banco Ita

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

The idea behind NL Industries and Banco Ita Chile 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 Global Correlations module to find global opportunities by holding instruments from different markets.