Correlation Between Nutrien and Yara International

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

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

Diversification Opportunities for Nutrien and Yara International

0.74

Correlation Coefficient

Nutrien  Yara International

Poor diversification

The 3 months correlation between Nutrien and Yara is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Nutrien and Yara International ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yara International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yara International ASA has no effect on the direction of Nutrien i.e., Nutrien and Yara International go up and down completely randomly.

Pair Corralation between Nutrien and Yara International

Considering the 90-day investment horizon Nutrien is expected to generate 1.06 times more return on investment than Yara International. However, Nutrien is 1.06 times more volatile than Yara International ASA. It trades about 0.14 of its potential returns per unit of risk. Yara International ASA is currently generating about 0.13 per unit of risk. If you would invest  4,364  in Nutrien on December 28, 2024 and sell it today you would earn a total of  726.00  from holding Nutrien or generate 16.64% 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 International ASA

Nutrien

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nutrien are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Nutrien reported solid returns over the last few months and may actually be approaching a breakup point.

Yara International ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yara International ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Yara International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nutrien and Yara International

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

The idea behind Nutrien and Yara International 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.