Correlation Between NL Industries and Guardforce

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

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

Diversification Opportunities for NL Industries and Guardforce

-0.07

Correlation Coefficient

NL Industries  Guardforce

Good diversification

The 3 months correlation between NL Industries and Guardforce is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Guardforce AI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardforce AI 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 Guardforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardforce AI has no effect on the direction of NL Industries i.e., NL Industries and Guardforce go up and down completely randomly.

Pair Corralation between NL Industries and Guardforce

Allowing for the 90-day total investment horizon NL Industries is expected to generate 0.73 times more return on investment than Guardforce. However, NL Industries is 1.37 times less risky than Guardforce. It trades about 0.14 of its potential returns per unit of risk. Guardforce AI Co is currently generating about 0.09 per unit of risk. If you would invest  634.00  in NL Industries on September 3, 2024 and sell it today you would earn a total of  161.00  from holding NL Industries or generate 25.39% return on investment over 90 days.

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

NL Industries  vs.  Guardforce AI Co

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 weak essential indicators, NL Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Guardforce AI

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with NL Industries and Guardforce

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

The idea behind NL Industries and Guardforce AI Co 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.