Correlation Between NL Industries and Catalyst Metals

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

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

Diversification Opportunities for NL Industries and Catalyst Metals

-0.39

Correlation Coefficient

NL Industries  Catalyst Metals

Very good diversification

The 3 months correlation between NL Industries and Catalyst is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Catalyst Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Metals 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 Catalyst Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Metals has no effect on the direction of NL Industries i.e., NL Industries and Catalyst Metals go up and down completely randomly.

Pair Corralation between NL Industries and Catalyst Metals

Allowing for the 90-day total investment horizon NL Industries is expected to generate 610.16 times less return on investment than Catalyst Metals. But when comparing it to its historical volatility, NL Industries is 1.66 times less risky than Catalyst Metals. It trades about 0.0 of its potential returns per unit of risk. Catalyst Metals Limited is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  165.00  in Catalyst Metals Limited on December 22, 2024 and sell it today you would earn a total of  142.00  from holding Catalyst Metals Limited or generate 86.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

NL Industries  vs.  Catalyst Metals Limited

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.

Catalyst Metals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Metals Limited are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Catalyst Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NL Industries and Catalyst Metals

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

The idea behind NL Industries and Catalyst Metals Limited 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.