Correlation Between SNDL and NL Industries

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

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

Diversification Opportunities for SNDL and NL Industries

-0.11

Correlation Coefficient

SNDL  NL Industries

Good diversification

The 3 months correlation between SNDL and NL Industries is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding SNDL Inc and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and SNDL 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 SNDL Inc are associated (or correlated) with NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of SNDL i.e., SNDL and NL Industries go up and down completely randomly.

Pair Corralation between SNDL and NL Industries

Given the investment horizon of 90 days SNDL Inc is expected to under-perform the NL Industries. In addition to that, SNDL is 1.09 times more volatile than NL Industries. It trades about -0.01 of its total potential returns per unit of risk. NL Industries is currently generating about 0.16 per unit of volatility. 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	100.0%
Values	Daily Returns

SNDL Inc  vs.  NL Industries

SNDL Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with SNDL and NL Industries

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

The idea behind SNDL Inc and NL Industries 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.