Correlation Between Nufarm and Dairy Farm
Can any of the company-specific risk be diversified away by investing in both Nufarm and Dairy Farm 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 Dairy Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nufarm Limited and Dairy Farm International, you can compare the effects of market volatilities on Nufarm and Dairy Farm 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 Dairy Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nufarm and Dairy Farm.
Diversification Opportunities for Nufarm and Dairy Farm
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Nufarm and Dairy is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited and Dairy Farm International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dairy Farm International 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 Dairy Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dairy Farm International has no effect on the direction of Nufarm i.e., Nufarm and Dairy Farm go up and down completely randomly.
Pair Corralation between Nufarm and Dairy Farm
Assuming the 90 days horizon Nufarm is expected to generate 1.32 times less return on investment than Dairy Farm. In addition to that, Nufarm is 1.25 times more volatile than Dairy Farm International. It trades about 0.23 of its total potential returns per unit of risk. Dairy Farm International is currently generating about 0.37 per unit of volatility. If you would invest 206.00 in Dairy Farm International on August 28, 2024 and sell it today you would earn a total of 28.00 from holding Dairy Farm International or generate 13.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nufarm Limited vs. Dairy Farm International
Performance |
| Timeline |
| Nufarm Limited |
| Dairy Farm International |
Nufarm and Dairy Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nufarm and Dairy Farm
The main advantage of trading using opposite Nufarm and Dairy Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nufarm position performs unexpectedly, Dairy Farm 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 Dairy Farm will offset losses from the drop in Dairy Farm's long position.| Nufarm vs. Superior Plus Corp | Nufarm vs. NMI Holdings | Nufarm vs. Origin Agritech | Nufarm vs. SIVERS SEMICONDUCTORS AB |
| Dairy Farm vs. Superior Plus Corp | Dairy Farm vs. NMI Holdings | Dairy Farm vs. Origin Agritech | Dairy Farm vs. SIVERS SEMICONDUCTORS AB |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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