Correlation Between NL Industries and Ainsworth Game

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

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

Diversification Opportunities for NL Industries and Ainsworth Game

-0.39

Correlation Coefficient

NL Industries  Ainsworth Game

Very good diversification

The 3 months correlation between NL Industries and Ainsworth is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Ainsworth Game Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ainsworth Game Technology and NL Industries 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 NL Industries are associated (or correlated) with Ainsworth Game. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ainsworth Game Technology has no effect on the direction of NL Industries i.e., NL Industries and Ainsworth Game go up and down completely randomly.

Pair Corralation between NL Industries and Ainsworth Game

Allowing for the 90-day total investment horizon NL Industries is expected to generate 39.48 times less return on investment than Ainsworth Game. But when comparing it to its historical volatility, NL Industries is 1.63 times less risky than Ainsworth Game. It trades about 0.01 of its potential returns per unit of risk. Ainsworth Game Technology is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  47.00  in Ainsworth Game Technology on September 24, 2024 and sell it today you would earn a total of  7.00  from holding Ainsworth Game Technology or generate 14.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

NL Industries  vs.  Ainsworth Game Technology

NL Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 7 (%) 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.

Ainsworth Game Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ainsworth Game Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ainsworth Game is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NL Industries and Ainsworth Game

The main advantage of trading using opposite NL Industries and Ainsworth Game positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries position performs unexpectedly, Ainsworth Game 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 Ainsworth Game will offset losses from the drop in Ainsworth Game's long position.

The idea behind NL Industries and Ainsworth Game Technology 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..