Correlation Between Nufarm and AUST AGRICULTURAL

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

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

Diversification Opportunities for Nufarm and AUST AGRICULTURAL

0.4

Correlation Coefficient

Nufarm  AUST AGRICULTURAL

Very weak diversification

The 3 months correlation between Nufarm and AUST is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited and AUST AGRICULTURAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUST AGRICULTURAL 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 Limited are associated (or correlated) with AUST AGRICULTURAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUST AGRICULTURAL has no effect on the direction of Nufarm i.e., Nufarm and AUST AGRICULTURAL go up and down completely randomly.

Pair Corralation between Nufarm and AUST AGRICULTURAL

Assuming the 90 days horizon Nufarm Limited is expected to under-perform the AUST AGRICULTURAL. In addition to that, Nufarm is 1.79 times more volatile than AUST AGRICULTURAL. It trades about -0.1 of its total potential returns per unit of risk. AUST AGRICULTURAL is currently generating about -0.08 per unit of volatility. If you would invest  87.00  in AUST AGRICULTURAL on September 26, 2024 and sell it today you would lose (5.00) from holding AUST AGRICULTURAL or give up 5.75% of portfolio value over 90 days.

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

Nufarm Limited  vs.  AUST AGRICULTURAL

Nufarm Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nufarm Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

AUST AGRICULTURAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AUST AGRICULTURAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AUST AGRICULTURAL 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 Nufarm and AUST AGRICULTURAL

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

The idea behind Nufarm Limited and AUST AGRICULTURAL 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.