Correlation Between Nufarm and Live Nation

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

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

Diversification Opportunities for Nufarm and Live Nation

0.36

Correlation Coefficient

Nufarm  Live Nation

Weak diversification

The 3 months correlation between Nufarm and Live is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited and Live Nation Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Nation Entertainment and Nufarm 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 Limited are associated (or correlated) with Live Nation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Nation Entertainment has no effect on the direction of Nufarm i.e., Nufarm and Live Nation go up and down completely randomly.

Pair Corralation between Nufarm and Live Nation

Assuming the 90 days horizon Nufarm Limited is expected to under-perform the Live Nation. But the stock apears to be less risky and, when comparing its historical volatility, Nufarm Limited is 1.07 times less risky than Live Nation. The stock trades about -0.03 of its potential returns per unit of risk. The Live Nation Entertainment is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  8,810  in Live Nation Entertainment on September 12, 2024 and sell it today you would earn a total of  4,115  from holding Live Nation Entertainment or generate 46.71% return on investment over 90 days.

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

Nufarm Limited  vs.  Live Nation Entertainment

Nufarm Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nufarm Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nufarm is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Live Nation Entertainment

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Live Nation Entertainment are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Live Nation reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nufarm and Live Nation

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

The idea behind Nufarm Limited and Live Nation Entertainment 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.