Correlation Between Nufarm and American Tower

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

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

Diversification Opportunities for Nufarm and American Tower

0.64

Correlation Coefficient

Nufarm  American Tower

Poor diversification

The 3 months correlation between Nufarm and American is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited and American Tower Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Tower Corp 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 American Tower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Tower Corp has no effect on the direction of Nufarm i.e., Nufarm and American Tower go up and down completely randomly.

Pair Corralation between Nufarm and American Tower

Assuming the 90 days horizon Nufarm Limited is expected to generate 1.15 times more return on investment than American Tower. However, Nufarm is 1.15 times more volatile than American Tower Corp. It trades about -0.02 of its potential returns per unit of risk. American Tower Corp is currently generating about -0.13 per unit of risk. If you would invest  222.00  in Nufarm Limited on October 26, 2024 and sell it today you would lose (8.00) from holding Nufarm Limited or give up 3.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Nufarm Limited  vs.  American Tower Corp

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

American Tower Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Tower Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Nufarm and American Tower

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

The idea behind Nufarm Limited and American Tower Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.