Correlation Between China Energy and Nufarm
Can any of the company-specific risk be diversified away by investing in both China Energy and Nufarm 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 China Energy and Nufarm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Energy Engineering and Nufarm Limited, you can compare the effects of market volatilities on China Energy and Nufarm 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 China Energy with a short position of Nufarm. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Energy and Nufarm.
Diversification Opportunities for China Energy and Nufarm
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between China and Nufarm is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding China Energy Engineering and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited and China Energy 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 China Energy Engineering are associated (or correlated) with Nufarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Limited has no effect on the direction of China Energy i.e., China Energy and Nufarm go up and down completely randomly.
Pair Corralation between China Energy and Nufarm
Assuming the 90 days horizon China Energy Engineering is expected to generate 2.12 times more return on investment than Nufarm. However, China Energy is 2.12 times more volatile than Nufarm Limited. It trades about 0.05 of its potential returns per unit of risk. Nufarm Limited is currently generating about -0.04 per unit of risk. If you would invest 5.88 in China Energy Engineering on September 3, 2024 and sell it today you would earn a total of 5.12 from holding China Energy Engineering or generate 87.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Energy Engineering vs. Nufarm Limited
Performance |
| Timeline |
| China Energy Engineering |
| Nufarm Limited |
China Energy and Nufarm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Energy and Nufarm
The main advantage of trading using opposite China Energy and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Energy position performs unexpectedly, Nufarm 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 Nufarm will offset losses from the drop in Nufarm's long position.| China Energy vs. Nufarm Limited | China Energy vs. SBM OFFSHORE | China Energy vs. Dairy Farm International | China Energy vs. Hitachi Construction Machinery |
Check out your portfolio center.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.
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