Correlation Between Nufarm and North American
Can any of the company-specific risk be diversified away by investing in both Nufarm and North American 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 North American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nufarm Limited and North American Construction, you can compare the effects of market volatilities on Nufarm and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nufarm and North American.
Diversification Opportunities for Nufarm and North American
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Nufarm and North is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of Nufarm i.e., Nufarm and North American go up and down completely randomly.
Pair Corralation between Nufarm and North American
Assuming the 90 days horizon Nufarm Limited is expected to under-perform the North American. But the stock apears to be less risky and, when comparing its historical volatility, Nufarm Limited is 1.48 times less risky than North American. The stock trades about -0.03 of its potential returns per unit of risk. The North American Construction is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,164 in North American Construction on August 28, 2024 and sell it today you would earn a total of 656.00 from holding North American Construction or generate 56.36% 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. North American Construction
Performance |
| Timeline |
| Nufarm Limited |
| North American Const |
Nufarm and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nufarm and North American
The main advantage of trading using opposite Nufarm and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nufarm position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| Nufarm vs. Superior Plus Corp | Nufarm vs. NMI Holdings | Nufarm vs. Origin Agritech | Nufarm vs. SIVERS SEMICONDUCTORS AB |
| North American vs. Monster Beverage Corp | North American vs. China Resources Beer | North American vs. Virtus Investment Partners | North American vs. Apollo Investment Corp |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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