Correlation Between NL Industries and BranchOut Food

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

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

Diversification Opportunities for NL Industries and BranchOut Food

-0.14

Correlation Coefficient

NL Industries  BranchOut Food

Good diversification

The 3 months correlation between NL Industries and BranchOut is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and BranchOut Food Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BranchOut Food Common 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 BranchOut Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BranchOut Food Common has no effect on the direction of NL Industries i.e., NL Industries and BranchOut Food go up and down completely randomly.

Pair Corralation between NL Industries and BranchOut Food

Allowing for the 90-day total investment horizon NL Industries is expected to under-perform the BranchOut Food. But the stock apears to be less risky and, when comparing its historical volatility, NL Industries is 2.04 times less risky than BranchOut Food. The stock trades about -0.22 of its potential returns per unit of risk. The BranchOut Food Common is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  161.00  in BranchOut Food Common on October 23, 2024 and sell it today you would earn a total of  18.00  from holding BranchOut Food Common or generate 11.18% return on investment over 90 days.

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

NL Industries  vs.  BranchOut Food Common

NL Industries

Risk-Adjusted Performance

0 of 100

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.

BranchOut Food Common

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BranchOut Food Common are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, BranchOut Food may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NL Industries and BranchOut Food

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

The idea behind NL Industries and BranchOut Food Common 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 Stocks Directory module to find actively traded stocks across global markets.