Correlation Between KRAKATAU STEEL and Nutrien

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

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

Diversification Opportunities for KRAKATAU STEEL and Nutrien

-0.04

Correlation Coefficient

KRAKATAU STEEL  Nutrien

Good diversification

The 3 months correlation between KRAKATAU and Nutrien is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding KRAKATAU STEEL B and Nutrien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutrien and KRAKATAU STEEL 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 KRAKATAU STEEL B 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 KRAKATAU STEEL i.e., KRAKATAU STEEL and Nutrien go up and down completely randomly.

Pair Corralation between KRAKATAU STEEL and Nutrien

Assuming the 90 days trading horizon KRAKATAU STEEL is expected to generate 1.01 times less return on investment than Nutrien. In addition to that, KRAKATAU STEEL is 1.16 times more volatile than Nutrien. It trades about 0.08 of its total potential returns per unit of risk. Nutrien is currently generating about 0.1 per unit of volatility. If you would invest  4,171  in Nutrien on December 30, 2024 and sell it today you would earn a total of  510.00  from holding Nutrien or generate 12.23% return on investment over 90 days.

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

KRAKATAU STEEL B   vs.  Nutrien

KRAKATAU STEEL B

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KRAKATAU STEEL B are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, KRAKATAU STEEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Nutrien

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nutrien are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nutrien reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KRAKATAU STEEL and Nutrien

The main advantage of trading using opposite KRAKATAU STEEL and Nutrien positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KRAKATAU STEEL 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 KRAKATAU STEEL B 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.