Correlation Between Bank of Queensland Limite and Nufarm

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

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

Diversification Opportunities for Bank of Queensland Limite and Nufarm

0.2

Correlation Coefficient

Bank of Queensland Limite  Nufarm

Modest diversification

The 3 months correlation between Bank and Nufarm is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Queensland and Nufarm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm and Bank of Queensland Limite 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 Bank of Queensland 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 has no effect on the direction of Bank of Queensland Limite i.e., Bank of Queensland Limite and Nufarm go up and down completely randomly.

Pair Corralation between Bank of Queensland Limite and Nufarm

Assuming the 90 days trading horizon Bank of Queensland Limite is expected to generate 19.07 times less return on investment than Nufarm. But when comparing it to its historical volatility, Bank of Queensland is 4.89 times less risky than Nufarm. It trades about 0.03 of its potential returns per unit of risk. Nufarm is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  356.00  in Nufarm on December 21, 2024 and sell it today you would earn a total of  34.00  from holding Nufarm or generate 9.55% return on investment over 90 days.

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

Bank of Queensland  vs.  Nufarm

Bank of Queensland Limite

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Queensland are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bank of Queensland Limite is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Nufarm

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nufarm are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Nufarm may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bank of Queensland Limite and Nufarm

The main advantage of trading using opposite Bank of Queensland Limite and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Queensland Limite 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 Bank of Queensland and Nufarm 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.