Correlation Between NL Industries and Blue Capital

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

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

Diversification Opportunities for NL Industries and Blue Capital

0.28

Correlation Coefficient

NL Industries  Blue Capital

Modest diversification

The 3 months correlation between NL Industries and Blue is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Blue Capital Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Capital Reinsurance 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 Blue Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Capital Reinsurance has no effect on the direction of NL Industries i.e., NL Industries and Blue Capital go up and down completely randomly.

Pair Corralation between NL Industries and Blue Capital

If you would invest  511.00  in NL Industries on October 24, 2024 and sell it today you would earn a total of  277.00  from holding NL Industries or generate 54.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.24%
Values	Daily Returns

NL Industries  vs.  Blue Capital Reinsurance

NL Industries

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Blue Capital Reinsurance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NL Industries and Blue Capital

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

The idea behind NL Industries and Blue Capital Reinsurance 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.