Correlation Between NL Industries and Mistras

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

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

Diversification Opportunities for NL Industries and Mistras

-0.34

Correlation Coefficient

NL Industries  Mistras

Very good diversification

The 3 months correlation between NL Industries and Mistras is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Mistras Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mistras Group 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 Mistras. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mistras Group has no effect on the direction of NL Industries i.e., NL Industries and Mistras go up and down completely randomly.

Pair Corralation between NL Industries and Mistras

Allowing for the 90-day total investment horizon NL Industries is expected to generate 0.75 times more return on investment than Mistras. However, NL Industries is 1.34 times less risky than Mistras. It trades about 0.14 of its potential returns per unit of risk. Mistras Group is currently generating about -0.06 per unit of risk. If you would invest  640.00  in NL Industries on August 31, 2024 and sell it today you would earn a total of  157.00  from holding NL Industries or generate 24.53% return on investment over 90 days.

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

NL Industries  vs.  Mistras Group

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.

Mistras Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mistras Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NL Industries and Mistras

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

The idea behind NL Industries and Mistras Group 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.