Correlation Between Food Life and Nutrien
Can any of the company-specific risk be diversified away by investing in both Food Life and Nutrien 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 Food Life and Nutrien into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Food Life Companies and Nutrien, you can compare the effects of market volatilities on Food Life and Nutrien 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 Food Life with a short position of Nutrien. Check out your portfolio center. Please also check ongoing floating volatility patterns of Food Life and Nutrien.
Diversification Opportunities for Food Life and Nutrien
Very weak diversification
The 3 months correlation between Food and Nutrien is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Food Life Companies and Nutrien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutrien and Food Life 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 Food Life Companies are associated (or correlated) with Nutrien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nutrien has no effect on the direction of Food Life i.e., Food Life and Nutrien go up and down completely randomly.
Pair Corralation between Food Life and Nutrien
Assuming the 90 days horizon Food Life Companies is expected to generate 1.17 times more return on investment than Nutrien. However, Food Life is 1.17 times more volatile than Nutrien. It trades about 0.46 of its potential returns per unit of risk. Nutrien is currently generating about -0.06 per unit of risk. If you would invest 1,780 in Food Life Companies on September 4, 2024 and sell it today you would earn a total of 380.00 from holding Food Life Companies or generate 21.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Food Life Companies vs. Nutrien
Performance |
| Timeline |
| Food Life Companies |
| Nutrien |
Food Life and Nutrien Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Food Life and Nutrien
The main advantage of trading using opposite Food Life and Nutrien positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Food Life position performs unexpectedly, Nutrien 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 Nutrien will offset losses from the drop in Nutrien's long position.| Food Life vs. McDonalds | Food Life vs. Chipotle Mexican Grill | Food Life vs. Superior Plus Corp | Food Life vs. NMI Holdings |
| Nutrien vs. Micron Technology | Nutrien vs. Perseus Mining Limited | Nutrien vs. AECOM TECHNOLOGY | Nutrien vs. ADRIATIC METALS LS 013355 |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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