Correlation Between Flagship Investments and Nufarm
Can any of the company-specific risk be diversified away by investing in both Flagship Investments 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 Flagship Investments and Nufarm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flagship Investments and Nufarm, you can compare the effects of market volatilities on Flagship Investments 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 Flagship Investments with a short position of Nufarm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flagship Investments and Nufarm.
Diversification Opportunities for Flagship Investments and Nufarm
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Flagship and Nufarm is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Flagship Investments and Nufarm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm and Flagship Investments 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 Flagship Investments 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 Flagship Investments i.e., Flagship Investments and Nufarm go up and down completely randomly.
Pair Corralation between Flagship Investments and Nufarm
Assuming the 90 days trading horizon Flagship Investments is expected to generate 2.42 times less return on investment than Nufarm. But when comparing it to its historical volatility, Flagship Investments is 2.14 times less risky than Nufarm. It trades about 0.08 of its potential returns per unit of risk. Nufarm is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 356.00 in Nufarm on October 24, 2024 and sell it today you would earn a total of 8.00 from holding Nufarm or generate 2.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Flagship Investments vs. Nufarm
Performance |
Timeline |
Flagship Investments |
Nufarm |
Flagship Investments and Nufarm Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Flagship Investments and Nufarm
The main advantage of trading using opposite Flagship Investments and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flagship Investments 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.Flagship Investments vs. Australian Foundation Investment | Flagship Investments vs. MFF Capital Investments | Flagship Investments vs. Metrics Master Income | Flagship Investments vs. L1 Long Short |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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