Correlation Between Snap and Nutrien
Can any of the company-specific risk be diversified away by investing in both Snap and Nutrien 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 Snap and Nutrien into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Nutrien, you can compare the effects of market volatilities on Snap and Nutrien 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 Snap with a short position of Nutrien. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Nutrien.
Diversification Opportunities for Snap and Nutrien
Poor diversification
The 3 months correlation between Snap and Nutrien is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Nutrien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutrien and Snap 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 Snap Inc are associated (or correlated) with Nutrien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nutrien has no effect on the direction of Snap i.e., Snap and Nutrien go up and down completely randomly.
Pair Corralation between Snap and Nutrien
Given the investment horizon of 90 days Snap Inc is expected to under-perform the Nutrien. In addition to that, Snap is 1.87 times more volatile than Nutrien. It trades about -0.03 of its total potential returns per unit of risk. Nutrien is currently generating about -0.03 per unit of volatility. If you would invest 6,639 in Nutrien on September 1, 2024 and sell it today you would lose (99.00) from holding Nutrien or give up 1.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Snap Inc vs. Nutrien
Performance |
| Timeline |
| Snap Inc |
| Nutrien |
Snap and Nutrien Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Nutrien
The main advantage of trading using opposite Snap and Nutrien positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Nutrien 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 Nutrien will offset losses from the drop in Nutrien's long position.The idea behind Snap Inc and Nutrien 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.| Nutrien vs. CVW CleanTech | Nutrien vs. Chemtrade Logistics Income | Nutrien vs. Bip Investment Corp | Nutrien vs. 2028 Investment Grade |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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