Correlation Between Nufarm and Insignia Financial
Can any of the company-specific risk be diversified away by investing in both Nufarm and Insignia Financial 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 Nufarm and Insignia Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nufarm and Insignia Financial, you can compare the effects of market volatilities on Nufarm and Insignia Financial 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 Nufarm with a short position of Insignia Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nufarm and Insignia Financial.
Diversification Opportunities for Nufarm and Insignia Financial
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nufarm and Insignia is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm and Insignia Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insignia Financial and Nufarm 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 Nufarm are associated (or correlated) with Insignia Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insignia Financial has no effect on the direction of Nufarm i.e., Nufarm and Insignia Financial go up and down completely randomly.
Pair Corralation between Nufarm and Insignia Financial
Assuming the 90 days trading horizon Nufarm is expected to under-perform the Insignia Financial. But the stock apears to be less risky and, when comparing its historical volatility, Nufarm is 1.47 times less risky than Insignia Financial. The stock trades about -0.04 of its potential returns per unit of risk. The Insignia Financial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 277.00 in Insignia Financial on November 1, 2024 and sell it today you would earn a total of 172.00 from holding Insignia Financial or generate 62.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nufarm vs. Insignia Financial
Performance |
| Timeline |
| Nufarm |
| Insignia Financial |
Nufarm and Insignia Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nufarm and Insignia Financial
The main advantage of trading using opposite Nufarm and Insignia Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nufarm position performs unexpectedly, Insignia Financial 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 Insignia Financial will offset losses from the drop in Insignia Financial's long position.| Nufarm vs. Northern Star Resources | Nufarm vs. Evolution Mining | Nufarm vs. Bluescope Steel | Nufarm vs. De Grey Mining |
| Insignia Financial vs. Navigator Global Investments | Insignia Financial vs. Platinum Asia Investments | Insignia Financial vs. Ainsworth Game Technology | Insignia Financial vs. Viva Leisure |
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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