Correlation Between North American and Nufarm
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and Nufarm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and Nufarm Limited, you can compare the effects of market volatilities on North American 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 North American with a short position of Nufarm. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Nufarm.
Diversification Opportunities for North American and Nufarm
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between North and Nufarm is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited and North American 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 North American Construction 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 North American i.e., North American and Nufarm go up and down completely randomly.
Pair Corralation between North American and Nufarm
Assuming the 90 days horizon North American Construction is expected to under-perform the Nufarm. In addition to that, North American is 1.59 times more volatile than Nufarm Limited. It trades about -0.21 of its total potential returns per unit of risk. Nufarm Limited is currently generating about 0.07 per unit of volatility. If you would invest 208.00 in Nufarm Limited on November 5, 2024 and sell it today you would earn a total of 4.00 from holding Nufarm Limited or generate 1.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
North American Construction vs. Nufarm Limited
Performance |
| Timeline |
| North American Const |
| Nufarm Limited |
North American and Nufarm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Nufarm
The main advantage of trading using opposite North American and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. ARDAGH METAL PACDL 0001 | North American vs. East Africa Metals | North American vs. MCEWEN MINING INC | North American vs. Ringmetall SE |
| Nufarm vs. PEPTONIC MEDICAL | Nufarm vs. MeVis Medical Solutions | Nufarm vs. ADRIATIC METALS LS 013355 | Nufarm vs. Nippon Light Metal |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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