Correlation Between JC Penney and NL Industries

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

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

Diversification Opportunities for JC Penney and NL Industries

0.0

Correlation Coefficient

JC Penney  NL Industries

Pay attention - limited upside

The 3 months correlation between JCP and NL Industries is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding J C Penney and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and JC Penney 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 J C Penney 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 JC Penney i.e., JC Penney and NL Industries go up and down completely randomly.

Pair Corralation between JC Penney and NL Industries

If you would invest  526.00  in NL Industries on February 6, 2024 and sell it today you would earn a total of  285.80  from holding NL Industries or generate 54.33% return on investment over 90 days.

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

J C Penney  vs.  NL Industries

J C Penney

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days J C Penney has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, JC Penney is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

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 weak essential indicators, NL Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JC Penney and NL Industries

The main advantage of trading using opposite JC Penney and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JC Penney 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 J C Penney 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.