Correlation Between Mistras and NL Industries

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

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

Diversification Opportunities for Mistras and NL Industries

-0.5

Correlation Coefficient

Mistras  NL Industries

Very good diversification

The 3 months correlation between Mistras and NL Industries is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Mistras Group and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and Mistras 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 Mistras 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 Mistras i.e., Mistras and NL Industries go up and down completely randomly.

Pair Corralation between Mistras and NL Industries

Allowing for the 90-day total investment horizon Mistras Group is expected to under-perform the NL Industries. But the stock apears to be less risky and, when comparing its historical volatility, Mistras Group is 1.01 times less risky than NL Industries. The stock trades about -0.03 of its potential returns per unit of risk. The NL Industries is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  774.00  in NL Industries on November 27, 2024 and sell it today you would lose (74.00) from holding NL Industries or give up 9.56% of portfolio value over 90 days.

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

Mistras Group  vs.  NL Industries

Mistras Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mistras Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Mistras may actually be approaching a critical reversion point that can send shares even higher in March 2025.

NL Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days NL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Mistras and NL Industries

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

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.