Correlation Between Nutrien and YARA INTL

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

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

Diversification Opportunities for Nutrien and YARA INTL

0.68

Correlation Coefficient

Nutrien  YARA INTL

Poor diversification

The 3 months correlation between Nutrien and YARA is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Nutrien and YARA INTL ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YARA INTL ASA and Nutrien 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 Nutrien are associated (or correlated) with YARA INTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YARA INTL ASA has no effect on the direction of Nutrien i.e., Nutrien and YARA INTL go up and down completely randomly.

Pair Corralation between Nutrien and YARA INTL

Assuming the 90 days horizon Nutrien is expected to generate 1.07 times more return on investment than YARA INTL. However, Nutrien is 1.07 times more volatile than YARA INTL ASA. It trades about 0.01 of its potential returns per unit of risk. YARA INTL ASA is currently generating about -0.11 per unit of risk. If you would invest  4,595  in Nutrien on September 5, 2024 and sell it today you would earn a total of  11.00  from holding Nutrien or generate 0.24% return on investment over 90 days.

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

Nutrien  vs.  YARA INTL ASA

Nutrien

Risk-Adjusted Performance

7 of 100

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 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

YARA INTL ASA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in YARA INTL ASA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, YARA INTL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nutrien and YARA INTL

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

The idea behind Nutrien and YARA INTL ASA 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.