Correlation Between Nufarm and Rollins

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

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

Diversification Opportunities for Nufarm and Rollins

0.7

Correlation Coefficient

Nufarm  Rollins

Poor diversification

The 3 months correlation between Nufarm and Rollins is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited and Rollins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rollins 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 Rollins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rollins has no effect on the direction of Nufarm i.e., Nufarm and Rollins go up and down completely randomly.

Pair Corralation between Nufarm and Rollins

Assuming the 90 days horizon Nufarm Limited is expected to generate 1.32 times more return on investment than Rollins. However, Nufarm is 1.32 times more volatile than Rollins. It trades about 0.08 of its potential returns per unit of risk. Rollins is currently generating about 0.07 per unit of risk. If you would invest  210.00  in Nufarm Limited on December 20, 2024 and sell it today you would earn a total of  16.00  from holding Nufarm Limited or generate 7.62% return on investment over 90 days.

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

Nufarm Limited  vs.  Rollins

Nufarm Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nufarm Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Nufarm may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Rollins

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rollins are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Rollins 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 Rollins

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

The idea behind Nufarm Limited and Rollins 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.