Correlation Between Nufarm Finance and Tabcorp Holdings

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

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

Diversification Opportunities for Nufarm Finance and Tabcorp Holdings

0.63

Correlation Coefficient

Nufarm Finance  Tabcorp Holdings

Poor diversification

The 3 months correlation between Nufarm and Tabcorp is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Finance NZ and Tabcorp Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tabcorp Holdings and Nufarm Finance 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 Nufarm Finance NZ are associated (or correlated) with Tabcorp Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tabcorp Holdings has no effect on the direction of Nufarm Finance i.e., Nufarm Finance and Tabcorp Holdings go up and down completely randomly.

Pair Corralation between Nufarm Finance and Tabcorp Holdings

Assuming the 90 days trading horizon Nufarm Finance NZ is expected to generate 0.28 times more return on investment than Tabcorp Holdings. However, Nufarm Finance NZ is 3.58 times less risky than Tabcorp Holdings. It trades about 0.05 of its potential returns per unit of risk. Tabcorp Holdings is currently generating about -0.03 per unit of risk. If you would invest  7,704  in Nufarm Finance NZ on October 8, 2024 and sell it today you would earn a total of  1,576  from holding Nufarm Finance NZ or generate 20.46% return on investment over 90 days.

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

Nufarm Finance NZ  vs.  Tabcorp Holdings

Nufarm Finance NZ

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nufarm Finance NZ are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Nufarm Finance is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Tabcorp Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tabcorp Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, Tabcorp Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nufarm Finance and Tabcorp Holdings

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

The idea behind Nufarm Finance NZ and Tabcorp Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.