Correlation Between Ainsworth Game and NL Industries

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

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

Diversification Opportunities for Ainsworth Game and NL Industries

-0.39

Correlation Coefficient

Ainsworth Game  NL Industries

Very good diversification

The 3 months correlation between Ainsworth and NL Industries is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ainsworth Game Technology and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and Ainsworth Game 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 Ainsworth Game Technology 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 Ainsworth Game i.e., Ainsworth Game and NL Industries go up and down completely randomly.

Pair Corralation between Ainsworth Game and NL Industries

Assuming the 90 days horizon Ainsworth Game Technology is expected to generate 1.63 times more return on investment than NL Industries. However, Ainsworth Game is 1.63 times more volatile than NL Industries. It trades about 0.16 of its potential returns per unit of risk. NL Industries is currently generating about 0.01 per unit of risk. If you would invest  47.00  in Ainsworth Game Technology on September 24, 2024 and sell it today you would earn a total of  7.00  from holding Ainsworth Game Technology or generate 14.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Ainsworth Game Technology  vs.  NL Industries

Ainsworth Game Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ainsworth Game Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ainsworth Game is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NL Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, NL Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ainsworth Game and NL Industries

The main advantage of trading using opposite Ainsworth Game and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ainsworth Game 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 Ainsworth Game Technology 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 Global Correlations module to find global opportunities by holding instruments from different markets.