Correlation Between NL Industries and Emclaire Financial

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

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

Diversification Opportunities for NL Industries and Emclaire Financial

-0.61

Correlation Coefficient

NL Industries  Emclaire Financial

Excellent diversification

The 3 months correlation between NL Industries and Emclaire is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Emclaire Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emclaire Financial 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 Emclaire Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emclaire Financial Corp has no effect on the direction of NL Industries i.e., NL Industries and Emclaire Financial go up and down completely randomly.

Pair Corralation between NL Industries and Emclaire Financial

If you would invest (100.00) in Emclaire Financial Corp on February 3, 2024 and sell it today you would earn a total of  100.00  from holding Emclaire Financial Corp or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	0.0%
Values	Daily Returns

NL Industries  vs.  Emclaire Financial Corp

NL Industries

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, NL Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Emclaire Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emclaire Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Emclaire Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NL Industries and Emclaire Financial

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

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