Correlation Between Nufarm and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both Nufarm and NMI Holdings 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 NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nufarm Limited and NMI Holdings, you can compare the effects of market volatilities on Nufarm and NMI Holdings 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 NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nufarm and NMI Holdings.
Diversification Opportunities for Nufarm and NMI Holdings
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nufarm and NMI is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings 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 Limited are associated (or correlated) with NMI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMI Holdings has no effect on the direction of Nufarm i.e., Nufarm and NMI Holdings go up and down completely randomly.
Pair Corralation between Nufarm and NMI Holdings
Assuming the 90 days horizon Nufarm Limited is expected to generate 1.31 times more return on investment than NMI Holdings. However, Nufarm is 1.31 times more volatile than NMI Holdings. It trades about 0.03 of its potential returns per unit of risk. NMI Holdings is currently generating about -0.01 per unit of risk. If you would invest 222.00 in Nufarm Limited on September 13, 2024 and sell it today you would earn a total of 2.00 from holding Nufarm Limited or generate 0.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nufarm Limited vs. NMI Holdings
Performance |
| Timeline |
| Nufarm Limited |
| NMI Holdings |
Nufarm and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nufarm and NMI Holdings
The main advantage of trading using opposite Nufarm and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nufarm position performs unexpectedly, NMI Holdings 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 NMI Holdings will offset losses from the drop in NMI Holdings' long position.| Nufarm vs. Superior Plus Corp | Nufarm vs. SIVERS SEMICONDUCTORS AB | Nufarm vs. NorAm Drilling AS | Nufarm vs. Norsk Hydro ASA |
| NMI Holdings vs. JJ SNACK FOODS | NMI Holdings vs. Tradegate AG Wertpapierhandelsbank | NMI Holdings vs. JSC Halyk bank | NMI Holdings vs. VARIOUS EATERIES LS |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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