Correlation Between Ennis and NL Industries

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

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

Diversification Opportunities for Ennis and NL Industries

0.08

Correlation Coefficient

Ennis  NL Industries

Significant diversification

The 3 months correlation between Ennis and NL Industries is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ennis Inc and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and Ennis 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 Ennis Inc are associated (or correlated) with NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of Ennis i.e., Ennis and NL Industries go up and down completely randomly.

Pair Corralation between Ennis and NL Industries

Considering the 90-day investment horizon Ennis Inc is expected to generate 0.26 times more return on investment than NL Industries. However, Ennis Inc is 3.81 times less risky than NL Industries. It trades about 0.06 of its potential returns per unit of risk. NL Industries is currently generating about -0.17 per unit of risk. If you would invest  2,076  in Ennis Inc on March 19, 2024 and sell it today you would earn a total of  13.00  from holding Ennis Inc or generate 0.63% return on investment over 90 days.

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

Ennis Inc  vs.  NL Industries

Ennis Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ennis Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, Ennis is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

NL Industries

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, NL Industries is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ennis and NL Industries

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

The idea behind Ennis Inc and NL Industries 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.