Correlation Between Consolidated Communications and Nufarm
Can any of the company-specific risk be diversified away by investing in both Consolidated Communications 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 Consolidated Communications and Nufarm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Communications Holdings and Nufarm Limited, you can compare the effects of market volatilities on Consolidated Communications 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 Consolidated Communications with a short position of Nufarm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Communications and Nufarm.
Diversification Opportunities for Consolidated Communications and Nufarm
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Consolidated and Nufarm is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited and Consolidated Communications 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 Consolidated Communications Holdings 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 Consolidated Communications i.e., Consolidated Communications and Nufarm go up and down completely randomly.
Pair Corralation between Consolidated Communications and Nufarm
Assuming the 90 days horizon Consolidated Communications Holdings is expected to generate 1.49 times more return on investment than Nufarm. However, Consolidated Communications is 1.49 times more volatile than Nufarm Limited. It trades about 0.02 of its potential returns per unit of risk. Nufarm Limited is currently generating about -0.04 per unit of risk. If you would invest 390.00 in Consolidated Communications Holdings on September 3, 2024 and sell it today you would earn a total of 52.00 from holding Consolidated Communications Holdings or generate 13.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consolidated Communications Ho vs. Nufarm Limited
Performance |
| Timeline |
| Consolidated Communications |
| Nufarm Limited |
Consolidated Communications and Nufarm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Communications and Nufarm
The main advantage of trading using opposite Consolidated Communications and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Communications 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.The idea behind Consolidated Communications Holdings and Nufarm Limited 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.
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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