Correlation Between NL Industries and Evolv Technologies

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

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

Diversification Opportunities for NL Industries and Evolv Technologies

-0.41

Correlation Coefficient

NL Industries  Evolv Technologies

Very good diversification

The 3 months correlation between NL Industries and Evolv is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Evolv Technologies Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolv Technologies 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 Evolv Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolv Technologies has no effect on the direction of NL Industries i.e., NL Industries and Evolv Technologies go up and down completely randomly.

Pair Corralation between NL Industries and Evolv Technologies

Allowing for the 90-day total investment horizon NL Industries is expected to generate 1.17 times less return on investment than Evolv Technologies. But when comparing it to its historical volatility, NL Industries is 2.4 times less risky than Evolv Technologies. It trades about 0.14 of its potential returns per unit of risk. Evolv Technologies Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  360.00  in Evolv Technologies Holdings on September 2, 2024 and sell it today you would earn a total of  45.00  from holding Evolv Technologies Holdings or generate 12.5% 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.  Evolv Technologies Holdings

NL Industries

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, NL Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Evolv Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Evolv Technologies Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Evolv Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NL Industries and Evolv Technologies

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

The idea behind NL Industries and Evolv Technologies Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.