Correlation Between NL Industries and Aterian

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Can any of the company-specific risk be diversified away by investing in both NL Industries and Aterian 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 Aterian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and Aterian, you can compare the effects of market volatilities on NL Industries and Aterian 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 Aterian. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and Aterian.

Diversification Opportunities for NL Industries and Aterian

-0.11
  Correlation Coefficient

Good diversification

The 3 months correlation between NL Industries and Aterian is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Aterian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aterian 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 Aterian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aterian has no effect on the direction of NL Industries i.e., NL Industries and Aterian go up and down completely randomly.

Pair Corralation between NL Industries and Aterian

Allowing for the 90-day total investment horizon NL Industries is expected to generate 0.96 times more return on investment than Aterian. However, NL Industries is 1.05 times less risky than Aterian. It trades about 0.01 of its potential returns per unit of risk. Aterian is currently generating about -0.1 per unit of risk. If you would invest  751.00  in NL Industries on October 15, 2024 and sell it today you would lose (5.00) from holding NL Industries or give up 0.67% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

NL Industries  vs.  Aterian

 Performance 
       Timeline  
NL Industries 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days NL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, NL Industries is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.
Aterian 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Aterian has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

NL Industries and Aterian Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NL Industries and Aterian

The main advantage of trading using opposite NL Industries and Aterian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries position performs unexpectedly, Aterian 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 Aterian will offset losses from the drop in Aterian's long position.
The idea behind NL Industries and Aterian 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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