Correlation Between Nufarm and Tamawood

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

By analyzing existing cross correlation between Nufarm and Tamawood, you can compare the effects of market volatilities on Nufarm and Tamawood 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 Tamawood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nufarm and Tamawood.

Diversification Opportunities for Nufarm and Tamawood

0.11

Correlation Coefficient

Nufarm  Tamawood

Average diversification

The 3 months correlation between Nufarm and Tamawood is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm and Tamawood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tamawood 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 are associated (or correlated) with Tamawood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tamawood has no effect on the direction of Nufarm i.e., Nufarm and Tamawood go up and down completely randomly.

Pair Corralation between Nufarm and Tamawood

Assuming the 90 days trading horizon Nufarm is expected to under-perform the Tamawood. But the stock apears to be less risky and, when comparing its historical volatility, Nufarm is 1.38 times less risky than Tamawood. The stock trades about -0.08 of its potential returns per unit of risk. The Tamawood is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  257.00  in Tamawood on September 26, 2024 and sell it today you would earn a total of  7.00  from holding Tamawood or generate 2.72% return on investment over 90 days.

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

Nufarm  vs.  Tamawood

Nufarm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nufarm has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Tamawood

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tamawood are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Tamawood is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nufarm and Tamawood

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

The idea behind Nufarm and Tamawood 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.