Correlation Between HNI Corp and NL Industries

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

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

Diversification Opportunities for HNI Corp and NL Industries

0.46

Correlation Coefficient

HNI Corp  NL Industries

Very weak diversification

The 3 months correlation between HNI and NL Industries is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding HNI Corp and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and HNI Corp 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 HNI Corp 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 HNI Corp i.e., HNI Corp and NL Industries go up and down completely randomly.

Pair Corralation between HNI Corp and NL Industries

Considering the 90-day investment horizon HNI Corp is expected to generate 0.67 times more return on investment than NL Industries. However, HNI Corp is 1.49 times less risky than NL Industries. It trades about 0.08 of its potential returns per unit of risk. NL Industries is currently generating about 0.04 per unit of risk. If you would invest  2,658  in HNI Corp on September 20, 2024 and sell it today you would earn a total of  2,435  from holding HNI Corp or generate 91.61% return on investment over 90 days.

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

HNI Corp  vs.  NL Industries

HNI Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days HNI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, HNI Corp is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

NL Industries

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, NL Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HNI Corp and NL Industries

The main advantage of trading using opposite HNI Corp and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HNI Corp 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 HNI Corp 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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.