Correlation Between Penta Ocean and Nufarm
Can any of the company-specific risk be diversified away by investing in both Penta Ocean and Nufarm 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 Penta Ocean and Nufarm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Penta Ocean Construction Co and Nufarm Limited, you can compare the effects of market volatilities on Penta Ocean and Nufarm 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 Penta Ocean with a short position of Nufarm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penta Ocean and Nufarm.
Diversification Opportunities for Penta Ocean and Nufarm
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Penta and Nufarm is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited and Penta Ocean 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 Penta Ocean Construction Co are associated (or correlated) with Nufarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Limited has no effect on the direction of Penta Ocean i.e., Penta Ocean and Nufarm go up and down completely randomly.
Pair Corralation between Penta Ocean and Nufarm
Assuming the 90 days horizon Penta Ocean is expected to generate 3.42 times less return on investment than Nufarm. But when comparing it to its historical volatility, Penta Ocean Construction Co is 1.46 times less risky than Nufarm. It trades about 0.09 of its potential returns per unit of risk. Nufarm Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 222.00 in Nufarm Limited on August 29, 2024 and sell it today you would earn a total of 22.00 from holding Nufarm Limited or generate 9.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Penta Ocean Construction Co vs. Nufarm Limited
Performance |
| Timeline |
| Penta Ocean Construc |
| Nufarm Limited |
Penta Ocean and Nufarm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Penta Ocean and Nufarm
The main advantage of trading using opposite Penta Ocean and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penta Ocean position performs unexpectedly, Nufarm 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 Nufarm will offset losses from the drop in Nufarm's long position.| Penta Ocean vs. Superior Plus Corp | Penta Ocean vs. NMI Holdings | Penta Ocean vs. Origin Agritech | Penta Ocean vs. SIVERS SEMICONDUCTORS AB |
| Nufarm vs. Superior Plus Corp | Nufarm vs. NMI Holdings | Nufarm vs. Origin Agritech | Nufarm 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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