Correlation Between Nufarm and Diamyd Medical
Can any of the company-specific risk be diversified away by investing in both Nufarm and Diamyd Medical 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 Diamyd Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nufarm Limited and Diamyd Medical AB, you can compare the effects of market volatilities on Nufarm and Diamyd Medical 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 Diamyd Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nufarm and Diamyd Medical.
Diversification Opportunities for Nufarm and Diamyd Medical
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nufarm and Diamyd is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited and Diamyd Medical AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamyd Medical AB 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 Diamyd Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamyd Medical AB has no effect on the direction of Nufarm i.e., Nufarm and Diamyd Medical go up and down completely randomly.
Pair Corralation between Nufarm and Diamyd Medical
Assuming the 90 days horizon Nufarm is expected to generate 18.61 times less return on investment than Diamyd Medical. But when comparing it to its historical volatility, Nufarm Limited is 2.01 times less risky than Diamyd Medical. It trades about 0.01 of its potential returns per unit of risk. Diamyd Medical AB is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 105.00 in Diamyd Medical AB on September 5, 2024 and sell it today you would earn a total of 8.00 from holding Diamyd Medical AB or generate 7.62% 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. Diamyd Medical AB
Performance |
| Timeline |
| Nufarm Limited |
| Diamyd Medical AB |
Nufarm and Diamyd Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nufarm and Diamyd Medical
The main advantage of trading using opposite Nufarm and Diamyd Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nufarm position performs unexpectedly, Diamyd Medical 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 Diamyd Medical will offset losses from the drop in Diamyd Medical's long position.The idea behind Nufarm Limited and Diamyd Medical AB 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.| Diamyd Medical vs. Nufarm Limited | Diamyd Medical vs. SOFI TECHNOLOGIES | Diamyd Medical vs. ACCSYS TECHPLC EO | Diamyd Medical vs. AAC TECHNOLOGHLDGADR |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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