Correlation Between NL Industries and 538034AN9

Can any of the company-specific risk be diversified away by investing in both NL Industries and 538034AN9 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 538034AN9 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NL Industries and Live Nation Entertainment, you can compare the effects of market volatilities on NL Industries and 538034AN9 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 538034AN9. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and 538034AN9.

Diversification Opportunities for NL Industries and 538034AN9

-0.08

Correlation Coefficient

NL Industries  538034AN9

Good diversification

The 3 months correlation between NL Industries and 538034AN9 is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Live Nation Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Nation Entertainment 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 538034AN9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Nation Entertainment has no effect on the direction of NL Industries i.e., NL Industries and 538034AN9 go up and down completely randomly.

Pair Corralation between NL Industries and 538034AN9

Allowing for the 90-day total investment horizon NL Industries is expected to generate 3.26 times more return on investment than 538034AN9. However, NL Industries is 3.26 times more volatile than Live Nation Entertainment. It trades about 0.16 of its potential returns per unit of risk. Live Nation Entertainment is currently generating about -0.04 per unit of risk. If you would invest  628.00  in NL Industries on September 5, 2024 and sell it today you would earn a total of  193.00  from holding NL Industries or generate 30.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	67.19%
Values	Daily Returns

NL Industries  vs.  Live Nation Entertainment

NL Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 12 (%) 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.

Live Nation Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Live Nation Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 538034AN9 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NL Industries and 538034AN9

The main advantage of trading using opposite NL Industries and 538034AN9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries position performs unexpectedly, 538034AN9 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 538034AN9 will offset losses from the drop in 538034AN9's long position.

The idea behind NL Industries and Live Nation Entertainment 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.