Correlation Between NL Industries and LanzaTech Global

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

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

Diversification Opportunities for NL Industries and LanzaTech Global

-0.63

Correlation Coefficient

NL Industries  LanzaTech Global

Excellent diversification

The 3 months correlation between NL Industries and LanzaTech is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and LanzaTech Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LanzaTech Global 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 LanzaTech Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LanzaTech Global has no effect on the direction of NL Industries i.e., NL Industries and LanzaTech Global go up and down completely randomly.

Pair Corralation between NL Industries and LanzaTech Global

Allowing for the 90-day total investment horizon NL Industries is expected to generate 0.42 times more return on investment than LanzaTech Global. However, NL Industries is 2.39 times less risky than LanzaTech Global. It trades about -0.01 of its potential returns per unit of risk. LanzaTech Global is currently generating about -0.15 per unit of risk. If you would invest  810.00  in NL Industries on February 2, 2024 and sell it today you would lose (10.00) from holding NL Industries or give up 1.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

NL Industries  vs.  LanzaTech Global

NL Industries

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 20 (%) 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.

LanzaTech Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LanzaTech Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with NL Industries and LanzaTech Global

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

The idea behind NL Industries and LanzaTech Global 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.