Correlation Between Nordon Indstrias and LPL Financial

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

By analyzing existing cross correlation between Nordon Indstrias Metalrgicas and LPL Financial Holdings, you can compare the effects of market volatilities on Nordon Indstrias and LPL Financial 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 Nordon Indstrias with a short position of LPL Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordon Indstrias and LPL Financial.

Diversification Opportunities for Nordon Indstrias and LPL Financial

-0.9

Correlation Coefficient

Nordon Indstrias  LPL Financial

Pay attention - limited upside

The 3 months correlation between Nordon and LPL is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Nordon Indstrias Metalrgicas and LPL Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPL Financial Holdings and Nordon Indstrias 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 Nordon Indstrias Metalrgicas are associated (or correlated) with LPL Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPL Financial Holdings has no effect on the direction of Nordon Indstrias i.e., Nordon Indstrias and LPL Financial go up and down completely randomly.

Pair Corralation between Nordon Indstrias and LPL Financial

Assuming the 90 days trading horizon Nordon Indstrias Metalrgicas is expected to under-perform the LPL Financial. In addition to that, Nordon Indstrias is 2.51 times more volatile than LPL Financial Holdings. It trades about -0.06 of its total potential returns per unit of risk. LPL Financial Holdings is currently generating about 0.3 per unit of volatility. If you would invest  9,716  in LPL Financial Holdings on October 8, 2024 and sell it today you would earn a total of  1,730  from holding LPL Financial Holdings or generate 17.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	97.3%
Values	Daily Returns

Nordon Indstrias Metalrgicas  vs.  LPL Financial Holdings

Nordon Indstrias Met

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordon Indstrias Metalrgicas 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 comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

LPL Financial Holdings

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in LPL Financial Holdings are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LPL Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordon Indstrias and LPL Financial

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

The idea behind Nordon Indstrias Metalrgicas and LPL Financial Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..