Correlation Between NL Industries and Playtika Holding

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

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

Diversification Opportunities for NL Industries and Playtika Holding

0.22

Correlation Coefficient

NL Industries  Playtika Holding

Modest diversification

The 3 months correlation between NL Industries and Playtika is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Playtika Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtika Holding Corp 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 Playtika Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playtika Holding Corp has no effect on the direction of NL Industries i.e., NL Industries and Playtika Holding go up and down completely randomly.

Pair Corralation between NL Industries and Playtika Holding

Allowing for the 90-day total investment horizon NL Industries is expected to generate 1.68 times more return on investment than Playtika Holding. However, NL Industries is 1.68 times more volatile than Playtika Holding Corp. It trades about 0.1 of its potential returns per unit of risk. Playtika Holding Corp is currently generating about -0.04 per unit of risk. If you would invest  590.00  in NL Industries on September 21, 2024 and sell it today you would earn a total of  192.00  from holding NL Industries or generate 32.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.07%
Values	Daily Returns

NL Industries  vs.  Playtika Holding Corp

NL Industries

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 6 (%) 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.

Playtika Holding Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Playtika Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with NL Industries and Playtika Holding

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

The idea behind NL Industries and Playtika Holding Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.