Correlation Between Lucid and NL Industries

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

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

Diversification Opportunities for Lucid and NL Industries

-0.59

Correlation Coefficient

Lucid  NL Industries

Excellent diversification

The 3 months correlation between Lucid and NL Industries is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and Lucid 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 Lucid Group 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 Lucid i.e., Lucid and NL Industries go up and down completely randomly.

Pair Corralation between Lucid and NL Industries

Given the investment horizon of 90 days Lucid is expected to generate 1.27 times less return on investment than NL Industries. In addition to that, Lucid is 1.69 times more volatile than NL Industries. It trades about 0.05 of its total potential returns per unit of risk. NL Industries is currently generating about 0.11 per unit of volatility. If you would invest  544.00  in NL Industries on September 25, 2024 and sell it today you would earn a total of  251.00  from holding NL Industries or generate 46.14% return on investment over 90 days.

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

Lucid Group  vs.  NL Industries

Lucid Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lucid Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Lucid is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

NL Industries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 5 (%) 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 Lucid and NL Industries

The main advantage of trading using opposite Lucid and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucid 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 Lucid Group 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.

Check out your portfolio center.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.