Correlation Between FactSet Research and NL Industries

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

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

Diversification Opportunities for FactSet Research and NL Industries

0.56

Correlation Coefficient

FactSet Research  NL Industries

Very weak diversification

The 3 months correlation between FactSet and NL Industries is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding FactSet Research Systems and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and FactSet Research 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 FactSet Research Systems 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 FactSet Research i.e., FactSet Research and NL Industries go up and down completely randomly.

Pair Corralation between FactSet Research and NL Industries

Considering the 90-day investment horizon FactSet Research Systems is expected to generate 0.43 times more return on investment than NL Industries. However, FactSet Research Systems is 2.31 times less risky than NL Industries. It trades about -0.03 of its potential returns per unit of risk. NL Industries is currently generating about -0.07 per unit of risk. If you would invest  48,552  in FactSet Research Systems on October 4, 2024 and sell it today you would lose (524.00) from holding FactSet Research Systems or give up 1.08% of portfolio value over 90 days.

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

FactSet Research Systems  vs.  NL Industries

FactSet Research Systems

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FactSet Research Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, FactSet Research is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

NL Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, NL Industries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with FactSet Research and NL Industries

The main advantage of trading using opposite FactSet Research and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FactSet Research 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 FactSet Research Systems 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.