Correlation Between Nufarm and PRECISION DRILLING

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

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

Diversification Opportunities for Nufarm and PRECISION DRILLING

-0.41

Correlation Coefficient

Nufarm  PRECISION DRILLING

Very good diversification

The 3 months correlation between Nufarm and PRECISION is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited and PRECISION DRILLING P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRECISION DRILLING 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 PRECISION DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PRECISION DRILLING has no effect on the direction of Nufarm i.e., Nufarm and PRECISION DRILLING go up and down completely randomly.

Pair Corralation between Nufarm and PRECISION DRILLING

Assuming the 90 days horizon Nufarm Limited is expected to generate 0.73 times more return on investment than PRECISION DRILLING. However, Nufarm Limited is 1.37 times less risky than PRECISION DRILLING. It trades about 0.05 of its potential returns per unit of risk. PRECISION DRILLING P is currently generating about -0.17 per unit of risk. If you would invest  208.00  in Nufarm Limited on December 21, 2024 and sell it today you would earn a total of  10.00  from holding Nufarm Limited or generate 4.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Nufarm Limited  vs.  PRECISION DRILLING P

Nufarm Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nufarm Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

PRECISION DRILLING

Risk-Adjusted Performance

Very Weak

Over the last 90 days PRECISION DRILLING P 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Nufarm and PRECISION DRILLING

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

The idea behind Nufarm Limited and PRECISION DRILLING P 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.