Correlation Between NL Industries and Enlight Renewable

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

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

Diversification Opportunities for NL Industries and Enlight Renewable

0.09

Correlation Coefficient

NL Industries  Enlight Renewable

Significant diversification

The 3 months correlation between NL Industries and Enlight is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Enlight Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enlight Renewable Energy 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 Enlight Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enlight Renewable Energy has no effect on the direction of NL Industries i.e., NL Industries and Enlight Renewable go up and down completely randomly.

Pair Corralation between NL Industries and Enlight Renewable

Allowing for the 90-day total investment horizon NL Industries is expected to generate 8.52 times less return on investment than Enlight Renewable. In addition to that, NL Industries is 1.2 times more volatile than Enlight Renewable Energy. It trades about 0.01 of its total potential returns per unit of risk. Enlight Renewable Energy is currently generating about 0.06 per unit of volatility. If you would invest  1,648  in Enlight Renewable Energy on October 6, 2024 and sell it today you would earn a total of  95.00  from holding Enlight Renewable Energy or generate 5.76% 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.  Enlight Renewable Energy

NL Industries

Risk-Adjusted Performance

2 of 100

Weak

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

Enlight Renewable Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enlight Renewable Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent essential indicators, Enlight Renewable unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NL Industries and Enlight Renewable

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

The idea behind NL Industries and Enlight Renewable Energy 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.