Correlation Between NL Industries and Phunware

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

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

Diversification Opportunities for NL Industries and Phunware

-0.68

Correlation Coefficient

NL Industries  Phunware

Excellent diversification

The 3 months correlation between NL Industries and Phunware is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Phunware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phunware 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 Phunware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phunware has no effect on the direction of NL Industries i.e., NL Industries and Phunware go up and down completely randomly.

Pair Corralation between NL Industries and Phunware

If you would invest  464.00  in NL Industries on September 12, 2024 and sell it today you would earn a total of  331.00  from holding NL Industries or generate 71.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	0.3%
Values	Daily Returns

NL Industries  vs.  Phunware

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

Phunware

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phunware has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Phunware is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with NL Industries and Phunware

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

The idea behind NL Industries and Phunware 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.