Correlation Between Traton SE and Nufarm

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

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

Diversification Opportunities for Traton SE and Nufarm

0.63

Correlation Coefficient

Traton SE  Nufarm

Poor diversification

The 3 months correlation between Traton and Nufarm is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Traton SE and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited and Traton SE 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 Traton SE 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 Traton SE i.e., Traton SE and Nufarm go up and down completely randomly.

Pair Corralation between Traton SE and Nufarm

Assuming the 90 days trading horizon Traton SE is expected to generate 1.66 times more return on investment than Nufarm. However, Traton SE is 1.66 times more volatile than Nufarm Limited. It trades about 0.09 of its potential returns per unit of risk. Nufarm Limited is currently generating about 0.09 per unit of risk. If you would invest  2,795  in Traton SE on December 30, 2024 and sell it today you would earn a total of  410.00  from holding Traton SE or generate 14.67% return on investment over 90 days.

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

Traton SE  vs.  Nufarm Limited

Traton SE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Traton SE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Traton SE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Nufarm Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nufarm Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nufarm may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Traton SE and Nufarm

The main advantage of trading using opposite Traton SE and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Traton SE 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 Traton SE 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.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.