Correlation Between NL Industries and WALMART

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

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

Diversification Opportunities for NL Industries and WALMART

-0.54

Correlation Coefficient

NL Industries  WALMART

Excellent diversification

The 3 months correlation between NL Industries and WALMART is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and WALMART INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WALMART INC 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 WALMART. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WALMART INC has no effect on the direction of NL Industries i.e., NL Industries and WALMART go up and down completely randomly.

Pair Corralation between NL Industries and WALMART

Allowing for the 90-day total investment horizon NL Industries is expected to generate 10.72 times more return on investment than WALMART. However, NL Industries is 10.72 times more volatile than WALMART INC. It trades about 0.15 of its potential returns per unit of risk. WALMART INC is currently generating about -0.18 per unit of risk. If you would invest  631.00  in NL Industries on September 4, 2024 and sell it today you would earn a total of  180.00  from holding NL Industries or generate 28.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	84.38%
Values	Daily Returns

NL Industries  vs.  WALMART INC

NL Industries

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 11 (%) 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.

WALMART INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WALMART INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, WALMART is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NL Industries and WALMART

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

The idea behind NL Industries and WALMART INC 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.