Correlation Between Nufarm and China Communications

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

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

Diversification Opportunities for Nufarm and China Communications

0.46

Correlation Coefficient

Nufarm  China Communications

Very weak diversification

The 3 months correlation between Nufarm and China is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications 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 China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Nufarm i.e., Nufarm and China Communications go up and down completely randomly.

Pair Corralation between Nufarm and China Communications

Assuming the 90 days horizon Nufarm Limited is expected to generate 0.48 times more return on investment than China Communications. However, Nufarm Limited is 2.09 times less risky than China Communications. It trades about 0.1 of its potential returns per unit of risk. China Communications Services is currently generating about 0.0 per unit of risk. If you would invest  208.00  in Nufarm Limited on December 28, 2024 and sell it today you would earn a total of  22.00  from holding Nufarm Limited or generate 10.58% return on investment over 90 days.

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

Nufarm Limited  vs.  China Communications Services

Nufarm Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nufarm Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nufarm may actually be approaching a critical reversion point that can send shares even higher in April 2025.

China Communications

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Nufarm and China Communications

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

The idea behind Nufarm Limited and China Communications Services 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .