Correlation Between Nufarm and United Utilities
Can any of the company-specific risk be diversified away by investing in both Nufarm and United Utilities 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 United Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nufarm Limited and United Utilities Group, you can compare the effects of market volatilities on Nufarm and United Utilities 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 United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nufarm and United Utilities.
Diversification Opportunities for Nufarm and United Utilities
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Nufarm and United is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of Nufarm i.e., Nufarm and United Utilities go up and down completely randomly.
Pair Corralation between Nufarm and United Utilities
Assuming the 90 days horizon Nufarm Limited is expected to under-perform the United Utilities. In addition to that, Nufarm is 1.12 times more volatile than United Utilities Group. It trades about -0.02 of its total potential returns per unit of risk. United Utilities Group is currently generating about 0.04 per unit of volatility. If you would invest 1,103 in United Utilities Group on August 26, 2024 and sell it today you would earn a total of 227.00 from holding United Utilities Group or generate 20.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nufarm Limited vs. United Utilities Group
Performance |
| Timeline |
| Nufarm Limited |
| United Utilities |
Nufarm and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nufarm and United Utilities
The main advantage of trading using opposite Nufarm and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nufarm position performs unexpectedly, United Utilities 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 United Utilities will offset losses from the drop in United Utilities' long position.| Nufarm vs. Superior Plus Corp | Nufarm vs. NMI Holdings | Nufarm vs. Origin Agritech | Nufarm vs. SIVERS SEMICONDUCTORS AB |
| United Utilities vs. VARIOUS EATERIES LS | United Utilities vs. Granite Construction | United Utilities vs. ETFS Coffee ETC | United Utilities vs. Nufarm Limited |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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