Correlation Between NL Industries and Gentex

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

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

Diversification Opportunities for NL Industries and Gentex

0.48

Correlation Coefficient

NL Industries  Gentex

Very weak diversification

The 3 months correlation between NL Industries and Gentex is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex 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 Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of NL Industries i.e., NL Industries and Gentex go up and down completely randomly.

Pair Corralation between NL Industries and Gentex

Allowing for the 90-day total investment horizon NL Industries is expected to generate 1.8 times more return on investment than Gentex. However, NL Industries is 1.8 times more volatile than Gentex. It trades about 0.04 of its potential returns per unit of risk. Gentex is currently generating about -0.17 per unit of risk. If you would invest  764.00  in NL Industries on December 29, 2024 and sell it today you would earn a total of  41.00  from holding NL Industries or generate 5.37% return on investment over 90 days.

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

NL Industries  vs.  Gentex

NL Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, NL Industries may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Gentex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gentex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with NL Industries and Gentex

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

The idea behind NL Industries and Gentex 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.