Correlation Between Nufarm and EBay

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

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

Diversification Opportunities for Nufarm and EBay

0.12

Correlation Coefficient

Nufarm  EBay

Average diversification

The 3 months correlation between Nufarm and EBay is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of Nufarm i.e., Nufarm and EBay go up and down completely randomly.

Pair Corralation between Nufarm and EBay

Assuming the 90 days horizon Nufarm Limited is expected to under-perform the EBay. In addition to that, Nufarm is 1.09 times more volatile than eBay Inc. It trades about -0.02 of its total potential returns per unit of risk. eBay Inc is currently generating about 0.07 per unit of volatility. If you would invest  5,668  in eBay Inc on September 13, 2024 and sell it today you would earn a total of  407.00  from holding eBay Inc or generate 7.18% return on investment over 90 days.

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

Nufarm Limited  vs.  eBay Inc

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.

eBay Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, EBay may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nufarm and EBay

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

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