Correlation Between NL Industries and Sanyo Special

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

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

Diversification Opportunities for NL Industries and Sanyo Special

0.82

Correlation Coefficient

NL Industries  Sanyo Special

Very poor diversification

The 3 months correlation between NL Industries and Sanyo is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Sanyo Special Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanyo Special Steel 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 Sanyo Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanyo Special Steel has no effect on the direction of NL Industries i.e., NL Industries and Sanyo Special go up and down completely randomly.

Pair Corralation between NL Industries and Sanyo Special

Allowing for the 90-day total investment horizon NL Industries is expected to under-perform the Sanyo Special. But the stock apears to be less risky and, when comparing its historical volatility, NL Industries is 1.38 times less risky than Sanyo Special. The stock trades about -0.31 of its potential returns per unit of risk. The Sanyo Special Steel is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  1,847  in Sanyo Special Steel on December 1, 2024 and sell it today you would lose (298.00) from holding Sanyo Special Steel or give up 16.13% of portfolio value over 90 days.

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

NL Industries  vs.  Sanyo Special Steel

NL Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days NL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Sanyo Special Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sanyo Special Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NL Industries and Sanyo Special

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

The idea behind NL Industries and Sanyo Special Steel 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.