Correlation Between Nufarm and China Resources
Can any of the company-specific risk be diversified away by investing in both Nufarm and China Resources 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 China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nufarm Limited and China Resources Beer, you can compare the effects of market volatilities on Nufarm and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nufarm and China Resources.
Diversification Opportunities for Nufarm and China Resources
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Nufarm and China is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of Nufarm i.e., Nufarm and China Resources go up and down completely randomly.
Pair Corralation between Nufarm and China Resources
Assuming the 90 days horizon Nufarm Limited is expected to generate 0.55 times more return on investment than China Resources. However, Nufarm Limited is 1.82 times less risky than China Resources. It trades about -0.03 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.08 per unit of risk. If you would invest 232.00 in Nufarm Limited on September 3, 2024 and sell it today you would lose (4.00) from holding Nufarm Limited or give up 1.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nufarm Limited vs. China Resources Beer
Performance |
| Timeline |
| Nufarm Limited |
| China Resources Beer |
Nufarm and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nufarm and China Resources
The main advantage of trading using opposite Nufarm and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nufarm position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.The idea behind Nufarm Limited and China Resources Beer 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.| China Resources vs. Chuangs China Investments | China Resources vs. PennyMac Mortgage Investment | China Resources vs. Wyndham Hotels Resorts | China Resources vs. MHP Hotel AG |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |