Correlation Between NL Industries and Cooper Tire

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

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

Diversification Opportunities for NL Industries and Cooper Tire

0.0

Correlation Coefficient

NL Industries  Cooper Tire

Pay attention - limited upside

The 3 months correlation between NL Industries and Cooper is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Cooper Tire Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cooper Tire Rubber 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 Cooper Tire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cooper Tire Rubber has no effect on the direction of NL Industries i.e., NL Industries and Cooper Tire go up and down completely randomly.

Pair Corralation between NL Industries and Cooper Tire

If you would invest  818.00  in NL Industries on February 5, 2024 and sell it today you would earn a total of  6.00  from holding NL Industries or generate 0.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

NL Industries  vs.  Cooper Tire Rubber

NL Industries

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, NL Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Cooper Tire Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NL Industries and Cooper Tire

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

The idea behind NL Industries and Cooper Tire Rubber 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.