Correlation Between NL Industries and Baldwin Insurance

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

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

Diversification Opportunities for NL Industries and Baldwin Insurance

0.1

Correlation Coefficient

NL Industries  Baldwin Insurance

Average diversification

The 3 months correlation between NL Industries and Baldwin is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and The Baldwin Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baldwin Insurance 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 Baldwin Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baldwin Insurance has no effect on the direction of NL Industries i.e., NL Industries and Baldwin Insurance go up and down completely randomly.

Pair Corralation between NL Industries and Baldwin Insurance

Allowing for the 90-day total investment horizon NL Industries is expected to generate 20.49 times less return on investment than Baldwin Insurance. In addition to that, NL Industries is 1.28 times more volatile than The Baldwin Insurance. It trades about 0.0 of its total potential returns per unit of risk. The Baldwin Insurance is currently generating about 0.09 per unit of volatility. If you would invest  3,927  in The Baldwin Insurance on December 24, 2024 and sell it today you would earn a total of  462.00  from holding The Baldwin Insurance or generate 11.76% return on investment over 90 days.

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

NL Industries  vs.  The Baldwin Insurance

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 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.

Baldwin Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Baldwin Insurance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain forward indicators, Baldwin Insurance displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NL Industries and Baldwin Insurance

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

The idea behind NL Industries and The Baldwin Insurance 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.