Correlation Between Australian Agricultural and Nufarm Finance

Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and Nufarm Finance 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 Australian Agricultural and Nufarm Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Australian Agricultural and Nufarm Finance NZ, you can compare the effects of market volatilities on Australian Agricultural and Nufarm Finance 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 Australian Agricultural with a short position of Nufarm Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and Nufarm Finance.

Diversification Opportunities for Australian Agricultural and Nufarm Finance

-0.52

Correlation Coefficient

Australian Agricultural  Nufarm Finance

Excellent diversification

The 3 months correlation between Australian and Nufarm is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and Nufarm Finance NZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Finance NZ and Australian Agricultural 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 Australian Agricultural are associated (or correlated) with Nufarm Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Finance NZ has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and Nufarm Finance go up and down completely randomly.

Pair Corralation between Australian Agricultural and Nufarm Finance

Assuming the 90 days trading horizon Australian Agricultural is expected to under-perform the Nufarm Finance. In addition to that, Australian Agricultural is 1.72 times more volatile than Nufarm Finance NZ. It trades about 0.0 of its total potential returns per unit of risk. Nufarm Finance NZ is currently generating about 0.07 per unit of volatility. If you would invest  8,828  in Nufarm Finance NZ on September 16, 2024 and sell it today you would earn a total of  273.00  from holding Nufarm Finance NZ or generate 3.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Australian Agricultural  vs.  Nufarm Finance NZ

Australian Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Agricultural has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Australian Agricultural is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Nufarm Finance NZ

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nufarm Finance NZ are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Nufarm Finance is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Australian Agricultural and Nufarm Finance

The main advantage of trading using opposite Australian Agricultural and Nufarm Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, Nufarm Finance 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 Finance will offset losses from the drop in Nufarm Finance's long position.

The idea behind Australian Agricultural and Nufarm Finance NZ 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.