Correlation Between NL Industries and ESGL Holdings

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

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

Diversification Opportunities for NL Industries and ESGL Holdings

-0.55

Correlation Coefficient

NL Industries  ESGL Holdings

Excellent diversification

The 3 months correlation between NL Industries and ESGL is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and ESGL Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESGL Holdings Limited 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 ESGL Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESGL Holdings Limited has no effect on the direction of NL Industries i.e., NL Industries and ESGL Holdings go up and down completely randomly.

Pair Corralation between NL Industries and ESGL Holdings

Allowing for the 90-day total investment horizon NL Industries is expected to generate 0.51 times more return on investment than ESGL Holdings. However, NL Industries is 1.98 times less risky than ESGL Holdings. It trades about 0.02 of its potential returns per unit of risk. ESGL Holdings Limited is currently generating about -0.3 per unit of risk. If you would invest  795.00  in NL Industries on September 22, 2024 and sell it today you would earn a total of  1.00  from holding NL Industries or generate 0.13% return on investment over 90 days.

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

NL Industries  vs.  ESGL Holdings Limited

NL Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, NL Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

ESGL Holdings Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESGL Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Etf's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Pair Trading with NL Industries and ESGL Holdings

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

The idea behind NL Industries and ESGL Holdings 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.