Correlation Between CVW CLEANTECH and Nufarm

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

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

Diversification Opportunities for CVW CLEANTECH and Nufarm

0.27

Correlation Coefficient

CVW CLEANTECH  Nufarm

Modest diversification

The 3 months correlation between CVW and Nufarm is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding CVW CLEANTECH INC and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited and CVW CLEANTECH 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 CVW CLEANTECH INC are associated (or correlated) with Nufarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Limited has no effect on the direction of CVW CLEANTECH i.e., CVW CLEANTECH and Nufarm go up and down completely randomly.

Pair Corralation between CVW CLEANTECH and Nufarm

Assuming the 90 days trading horizon CVW CLEANTECH INC is expected to under-perform the Nufarm. In addition to that, CVW CLEANTECH is 1.54 times more volatile than Nufarm Limited. It trades about -0.01 of its total potential returns per unit of risk. Nufarm Limited is currently generating about 0.0 per unit of volatility. If you would invest  230.00  in Nufarm Limited on September 3, 2024 and sell it today you would lose (2.00) from holding Nufarm Limited or give up 0.87% of portfolio value over 90 days.

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

CVW CLEANTECH INC  vs.  Nufarm Limited

CVW CLEANTECH INC

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CVW CLEANTECH and Nufarm

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

The idea behind CVW CLEANTECH INC and Nufarm Limited 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.