Correlation Between Ampco Pittsburgh and NL Industries

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

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

Diversification Opportunities for Ampco Pittsburgh and NL Industries

-0.05

Correlation Coefficient

Ampco Pittsburgh  NL Industries

Good diversification

The 3 months correlation between Ampco and NL Industries is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ampco Pittsburgh and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and Ampco Pittsburgh 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 Ampco Pittsburgh 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 Ampco Pittsburgh i.e., Ampco Pittsburgh and NL Industries go up and down completely randomly.

Pair Corralation between Ampco Pittsburgh and NL Industries

Allowing for the 90-day total investment horizon Ampco Pittsburgh is expected to generate 1.45 times more return on investment than NL Industries. However, Ampco Pittsburgh is 1.45 times more volatile than NL Industries. It trades about 0.01 of its potential returns per unit of risk. NL Industries is currently generating about -0.05 per unit of risk. If you would invest  202.00  in Ampco Pittsburgh on November 27, 2024 and sell it today you would lose (5.00) from holding Ampco Pittsburgh or give up 2.48% of portfolio value over 90 days.

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

Ampco Pittsburgh  vs.  NL Industries

Ampco Pittsburgh

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ampco Pittsburgh has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Ampco Pittsburgh is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

NL Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days NL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Ampco Pittsburgh and NL Industries

The main advantage of trading using opposite Ampco Pittsburgh and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ampco Pittsburgh 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 Ampco Pittsburgh 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.