Correlation Between Aussie Broadband and Nufarm
Can any of the company-specific risk be diversified away by investing in both Aussie Broadband 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 Aussie Broadband and Nufarm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aussie Broadband and Nufarm, you can compare the effects of market volatilities on Aussie Broadband 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 Aussie Broadband with a short position of Nufarm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aussie Broadband and Nufarm.
Diversification Opportunities for Aussie Broadband and Nufarm
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Aussie and Nufarm is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Aussie Broadband and Nufarm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm and Aussie Broadband 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 Aussie Broadband 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 has no effect on the direction of Aussie Broadband i.e., Aussie Broadband and Nufarm go up and down completely randomly.
Pair Corralation between Aussie Broadband and Nufarm
Assuming the 90 days trading horizon Aussie Broadband is expected to generate 17.34 times less return on investment than Nufarm. But when comparing it to its historical volatility, Aussie Broadband is 1.09 times less risky than Nufarm. It trades about 0.0 of its potential returns per unit of risk. Nufarm is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 380.00 in Nufarm on August 30, 2024 and sell it today you would earn a total of 7.00 from holding Nufarm or generate 1.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Aussie Broadband vs. Nufarm
Performance |
| Timeline |
| Aussie Broadband |
| Nufarm |
Aussie Broadband and Nufarm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aussie Broadband and Nufarm
The main advantage of trading using opposite Aussie Broadband and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aussie Broadband 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.| Aussie Broadband vs. Tlou Energy | Aussie Broadband vs. Encounter Resources | Aussie Broadband vs. Southern Cross Gold | Aussie Broadband vs. Minbos Resources |
| Nufarm vs. BKI Investment | Nufarm vs. Sandon Capital Investments | Nufarm vs. Diversified United Investment | Nufarm vs. ACDC Metals |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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