Correlation Between Kingboard Chemical and NL Industries

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

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

Diversification Opportunities for Kingboard Chemical and NL Industries

-0.27

Correlation Coefficient

Kingboard Chemical  NL Industries

Very good diversification

The 3 months correlation between Kingboard and NL Industries is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Kingboard Chemical Holdings and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and Kingboard Chemical 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 Kingboard Chemical 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 Kingboard Chemical i.e., Kingboard Chemical and NL Industries go up and down completely randomly.

Pair Corralation between Kingboard Chemical and NL Industries

If you would invest  804.00  in NL Industries on October 26, 2024 and sell it today you would earn a total of  9.00  from holding NL Industries or generate 1.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Kingboard Chemical Holdings  vs.  NL Industries

Kingboard Chemical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingboard Chemical Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Kingboard Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 Kingboard Chemical and NL Industries

The main advantage of trading using opposite Kingboard Chemical and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingboard Chemical 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 Kingboard Chemical 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.