Correlation Between Evolution Mining and NL Industries

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

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

Diversification Opportunities for Evolution Mining and NL Industries

0.34

Correlation Coefficient

Evolution Mining  NL Industries

Weak diversification

The 3 months correlation between Evolution and NL Industries is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Mining and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and Evolution Mining 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 Evolution Mining 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 Evolution Mining i.e., Evolution Mining and NL Industries go up and down completely randomly.

Pair Corralation between Evolution Mining and NL Industries

Assuming the 90 days horizon Evolution Mining is expected to generate 1.42 times more return on investment than NL Industries. However, Evolution Mining is 1.42 times more volatile than NL Industries. It trades about 0.04 of its potential returns per unit of risk. NL Industries is currently generating about 0.04 per unit of risk. If you would invest  193.00  in Evolution Mining on September 24, 2024 and sell it today you would earn a total of  92.00  from holding Evolution Mining or generate 47.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.99%
Values	Daily Returns

Evolution Mining  vs.  NL Industries

Evolution Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolution Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company 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 Evolution Mining and NL Industries

The main advantage of trading using opposite Evolution Mining and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evolution Mining 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 Evolution Mining 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.