Correlation Between XLMedia PLC and Nufarm

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

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

Diversification Opportunities for XLMedia PLC and Nufarm

0.28

Correlation Coefficient

XLMedia PLC  Nufarm

Modest diversification

The 3 months correlation between XLMedia and Nufarm is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding XLMedia PLC and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited and XLMedia PLC 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 XLMedia PLC are associated (or correlated) with Nufarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Limited has no effect on the direction of XLMedia PLC i.e., XLMedia PLC and Nufarm go up and down completely randomly.

Pair Corralation between XLMedia PLC and Nufarm

Assuming the 90 days horizon XLMedia PLC is expected to generate 1.79 times more return on investment than Nufarm. However, XLMedia PLC is 1.79 times more volatile than Nufarm Limited. It trades about 0.13 of its potential returns per unit of risk. Nufarm Limited is currently generating about -0.03 per unit of risk. If you would invest  11.00  in XLMedia PLC on September 12, 2024 and sell it today you would earn a total of  3.00  from holding XLMedia PLC or generate 27.27% return on investment over 90 days.

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

XLMedia PLC  vs.  Nufarm Limited

XLMedia PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in XLMedia PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, XLMedia PLC reported solid returns over the last few months and may actually be approaching a breakup point.

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 nearly stable basic indicators, Nufarm is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with XLMedia PLC and Nufarm

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

The idea behind XLMedia PLC and Nufarm Limited 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.