Correlation Between Albemarle Corp and Nufarm

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

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

Diversification Opportunities for Albemarle Corp and Nufarm

0.61

Correlation Coefficient

Albemarle Corp  Nufarm

Poor diversification

The 3 months correlation between Albemarle and Nufarm is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Albemarle Corp and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited and Albemarle Corp 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 Albemarle Corp 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 Albemarle Corp i.e., Albemarle Corp and Nufarm go up and down completely randomly.

Pair Corralation between Albemarle Corp and Nufarm

Assuming the 90 days trading horizon Albemarle Corp is expected to generate 1.66 times more return on investment than Nufarm. However, Albemarle Corp is 1.66 times more volatile than Nufarm Limited. It trades about 0.05 of its potential returns per unit of risk. Nufarm Limited is currently generating about 0.04 per unit of risk. If you would invest  8,447  in Albemarle Corp on October 26, 2024 and sell it today you would earn a total of  149.00  from holding Albemarle Corp or generate 1.76% return on investment over 90 days.

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

Albemarle Corp  vs.  Nufarm Limited

Albemarle Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Albemarle Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Albemarle Corp is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Albemarle Corp and Nufarm

The main advantage of trading using opposite Albemarle Corp and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Albemarle Corp 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 Albemarle Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.