Correlation Between Australian Dairy and Nufarm Finance
Can any of the company-specific risk be diversified away by investing in both Australian Dairy and Nufarm Finance 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 Australian Dairy and Nufarm Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Dairy Farms and Nufarm Finance NZ, you can compare the effects of market volatilities on Australian Dairy and Nufarm Finance 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 Australian Dairy with a short position of Nufarm Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Dairy and Nufarm Finance.
Diversification Opportunities for Australian Dairy and Nufarm Finance
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Australian and Nufarm is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Australian Dairy Farms and Nufarm Finance NZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Finance NZ and Australian Dairy 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 Australian Dairy Farms are associated (or correlated) with Nufarm Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Finance NZ has no effect on the direction of Australian Dairy i.e., Australian Dairy and Nufarm Finance go up and down completely randomly.
Pair Corralation between Australian Dairy and Nufarm Finance
Assuming the 90 days trading horizon Australian Dairy Farms is expected to generate 8.76 times more return on investment than Nufarm Finance. However, Australian Dairy is 8.76 times more volatile than Nufarm Finance NZ. It trades about 0.38 of its potential returns per unit of risk. Nufarm Finance NZ is currently generating about 0.16 per unit of risk. If you would invest 2.00 in Australian Dairy Farms on August 30, 2024 and sell it today you would earn a total of 0.90 from holding Australian Dairy Farms or generate 45.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Dairy Farms vs. Nufarm Finance NZ
Performance |
| Timeline |
| Australian Dairy Farms |
| Nufarm Finance NZ |
Australian Dairy and Nufarm Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Dairy and Nufarm Finance
The main advantage of trading using opposite Australian Dairy and Nufarm Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Dairy position performs unexpectedly, Nufarm Finance 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 Finance will offset losses from the drop in Nufarm Finance's long position.| Australian Dairy vs. PVW Resources | Australian Dairy vs. Woolworths | Australian Dairy vs. Wesfarmers | Australian Dairy vs. Coles Group |
| Nufarm Finance vs. Champion Iron | Nufarm Finance vs. Ridley | Nufarm Finance vs. Australian Dairy Farms | Nufarm Finance vs. Perpetual Credit Income |
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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