Correlation Between BrightView Holdings and NL Industries

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

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

Diversification Opportunities for BrightView Holdings and NL Industries

0.81

Correlation Coefficient

BrightView Holdings  NL Industries

Very poor diversification

The 3 months correlation between BrightView and NL Industries is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding BrightView Holdings and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and BrightView Holdings 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 BrightView Holdings 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 BrightView Holdings i.e., BrightView Holdings and NL Industries go up and down completely randomly.

Pair Corralation between BrightView Holdings and NL Industries

Allowing for the 90-day total investment horizon BrightView Holdings is expected to under-perform the NL Industries. But the stock apears to be less risky and, when comparing its historical volatility, BrightView Holdings is 1.43 times less risky than NL Industries. The stock trades about -0.18 of its potential returns per unit of risk. The NL Industries is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  789.00  in NL Industries on November 27, 2024 and sell it today you would lose (88.00) from holding NL Industries or give up 11.15% of portfolio value over 90 days.

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

BrightView Holdings  vs.  NL Industries

BrightView Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days BrightView Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in March 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated 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 BrightView Holdings and NL Industries

The main advantage of trading using opposite BrightView Holdings and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BrightView Holdings 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 BrightView Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.