Correlation Between NL Industries and Crown

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

By analyzing existing cross correlation between NL Industries and Crown Cork 7375, you can compare the effects of market volatilities on NL Industries and Crown 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 Crown. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and Crown.

Diversification Opportunities for NL Industries and Crown

0.01

Correlation Coefficient

NL Industries  Crown

Significant diversification

The 3 months correlation between NL Industries and Crown is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Crown Cork 7375 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Cork 7375 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 Crown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Cork 7375 has no effect on the direction of NL Industries i.e., NL Industries and Crown go up and down completely randomly.

Pair Corralation between NL Industries and Crown

Allowing for the 90-day total investment horizon NL Industries is expected to under-perform the Crown. In addition to that, NL Industries is 5.04 times more volatile than Crown Cork 7375. It trades about 0.0 of its total potential returns per unit of risk. Crown Cork 7375 is currently generating about 0.08 per unit of volatility. If you would invest  10,278  in Crown Cork 7375 on December 26, 2024 and sell it today you would earn a total of  341.00  from holding Crown Cork 7375 or generate 3.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

NL Industries  vs.  Crown Cork 7375

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 quite persistent essential indicators, NL Industries is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Crown Cork 7375

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Crown Cork 7375 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Crown is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NL Industries and Crown

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

The idea behind NL Industries and Crown Cork 7375 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.