Correlation Between Yara International and Nutrien

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

By analyzing existing cross correlation between Yara International ASA and Nutrien, you can compare the effects of market volatilities on Yara International and Nutrien 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 Yara International with a short position of Nutrien. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yara International and Nutrien.

Diversification Opportunities for Yara International and Nutrien

0.77

Correlation Coefficient

Yara International  Nutrien

Poor diversification

The 3 months correlation between Yara and Nutrien is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Yara International ASA and Nutrien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutrien and Yara International 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 Yara International ASA are associated (or correlated) with Nutrien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nutrien has no effect on the direction of Yara International i.e., Yara International and Nutrien go up and down completely randomly.

Pair Corralation between Yara International and Nutrien

Assuming the 90 days horizon Yara International is expected to generate 2.39 times less return on investment than Nutrien. In addition to that, Yara International is 1.14 times more volatile than Nutrien. It trades about 0.01 of its total potential returns per unit of risk. Nutrien is currently generating about 0.03 per unit of volatility. If you would invest  4,592  in Nutrien on September 1, 2024 and sell it today you would earn a total of  74.00  from holding Nutrien or generate 1.61% return on investment over 90 days.

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

Yara International ASA  vs.  Nutrien

Yara International ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yara International ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Yara International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Nutrien

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nutrien are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nutrien is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Yara International and Nutrien

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

The idea behind Yara International ASA and Nutrien 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.