Correlation Between Nutrien and American Vanguard

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

By analyzing existing cross correlation between Nutrien and American Vanguard, you can compare the effects of market volatilities on Nutrien and American Vanguard 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 American Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nutrien and American Vanguard.

Diversification Opportunities for Nutrien and American Vanguard

0.38

Correlation Coefficient

Nutrien  American Vanguard

Weak diversification

The 3 months correlation between Nutrien and American is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Nutrien and American Vanguard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Vanguard 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 American Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Vanguard has no effect on the direction of Nutrien i.e., Nutrien and American Vanguard go up and down completely randomly.

Pair Corralation between Nutrien and American Vanguard

Considering the 90-day investment horizon Nutrien is expected to generate 0.56 times more return on investment than American Vanguard. However, Nutrien is 1.78 times less risky than American Vanguard. It trades about 0.1 of its potential returns per unit of risk. American Vanguard is currently generating about -0.07 per unit of risk. If you would invest  4,719  in Nutrien on December 1, 2024 and sell it today you would earn a total of  517.00  from holding Nutrien or generate 10.96% return on investment over 90 days.

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

Nutrien  vs.  American Vanguard

Nutrien

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nutrien are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Nutrien may actually be approaching a critical reversion point that can send shares even higher in April 2025.

American Vanguard

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Vanguard has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Nutrien and American Vanguard

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

The idea behind Nutrien and American Vanguard 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.