Correlation Between Nufarm and COMPUTERSHARE

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

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

Diversification Opportunities for Nufarm and COMPUTERSHARE

-0.3

Correlation Coefficient

Nufarm  COMPUTERSHARE

Very good diversification

The 3 months correlation between Nufarm and COMPUTERSHARE is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited and COMPUTERSHARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMPUTERSHARE 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 COMPUTERSHARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMPUTERSHARE has no effect on the direction of Nufarm i.e., Nufarm and COMPUTERSHARE go up and down completely randomly.

Pair Corralation between Nufarm and COMPUTERSHARE

Assuming the 90 days horizon Nufarm Limited is expected to under-perform the COMPUTERSHARE. In addition to that, Nufarm is 1.19 times more volatile than COMPUTERSHARE. It trades about -0.05 of its total potential returns per unit of risk. COMPUTERSHARE is currently generating about 0.06 per unit of volatility. If you would invest  1,377  in COMPUTERSHARE on October 11, 2024 and sell it today you would earn a total of  703.00  from holding COMPUTERSHARE or generate 51.05% return on investment over 90 days.

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

Nufarm Limited  vs.  COMPUTERSHARE

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

COMPUTERSHARE

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in COMPUTERSHARE are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, COMPUTERSHARE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nufarm and COMPUTERSHARE

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

The idea behind Nufarm Limited and COMPUTERSHARE 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.