Correlation Between Nutrien and Food Life

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

By analyzing existing cross correlation between Nutrien and Food Life Companies, you can compare the effects of market volatilities on Nutrien and Food Life 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 Nutrien with a short position of Food Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nutrien and Food Life.

Diversification Opportunities for Nutrien and Food Life

0.54

Correlation Coefficient

Nutrien  Food Life

Very weak diversification

The 3 months correlation between Nutrien and Food is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Nutrien and Food Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Food Life Companies and Nutrien 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 Nutrien are associated (or correlated) with Food Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Food Life Companies has no effect on the direction of Nutrien i.e., Nutrien and Food Life go up and down completely randomly.

Pair Corralation between Nutrien and Food Life

Assuming the 90 days horizon Nutrien is expected to generate 2.88 times less return on investment than Food Life. But when comparing it to its historical volatility, Nutrien is 1.05 times less risky than Food Life. It trades about 0.08 of its potential returns per unit of risk. Food Life Companies is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,690  in Food Life Companies on September 4, 2024 and sell it today you would earn a total of  470.00  from holding Food Life Companies or generate 27.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Nutrien  vs.  Food Life Companies

Nutrien

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nutrien are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Nutrien may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Food Life Companies

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Food Life Companies are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Food Life reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nutrien and Food Life

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

The idea behind Nutrien and Food Life Companies 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.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.