Correlation Between NL Industries and AMREP

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

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

Diversification Opportunities for NL Industries and AMREP

0.62

Correlation Coefficient

NL Industries  AMREP

Poor diversification

The 3 months correlation between NL Industries and AMREP is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and AMREP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMREP 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 AMREP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMREP has no effect on the direction of NL Industries i.e., NL Industries and AMREP go up and down completely randomly.

Pair Corralation between NL Industries and AMREP

Allowing for the 90-day total investment horizon NL Industries is expected to generate 0.96 times more return on investment than AMREP. However, NL Industries is 1.04 times less risky than AMREP. It trades about -0.05 of its potential returns per unit of risk. AMREP is currently generating about -0.16 per unit of risk. If you would invest  789.00  in NL Industries on November 27, 2024 and sell it today you would lose (88.00) from holding NL Industries or give up 11.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

NL Industries  vs.  AMREP

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.

AMREP

Risk-Adjusted Performance

Very Weak

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

Pair Trading with NL Industries and AMREP

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

The idea behind NL Industries and AMREP 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.