Correlation Between Nufarm Finance and Nova Eye

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

By analyzing existing cross correlation between Nufarm Finance NZ and Nova Eye Medical, you can compare the effects of market volatilities on Nufarm Finance and Nova Eye 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 Finance with a short position of Nova Eye. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nufarm Finance and Nova Eye.

Diversification Opportunities for Nufarm Finance and Nova Eye

0.77

Correlation Coefficient

Nufarm Finance  Nova Eye

Poor diversification

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

Pair Corralation between Nufarm Finance and Nova Eye

Assuming the 90 days trading horizon Nufarm Finance NZ is expected to generate 0.07 times more return on investment than Nova Eye. However, Nufarm Finance NZ is 14.6 times less risky than Nova Eye. It trades about 0.0 of its potential returns per unit of risk. Nova Eye Medical is currently generating about -0.01 per unit of risk. If you would invest  9,100  in Nufarm Finance NZ on February 29, 2024 and sell it today you would earn a total of  0.00  from holding Nufarm Finance NZ or generate 0.0% return on investment over 90 days.

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

Nufarm Finance NZ  vs.  Nova Eye Medical

Nufarm Finance NZ

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nufarm Finance NZ are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Nufarm Finance is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Nova Eye Medical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Eye Medical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Nova Eye unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nufarm Finance and Nova Eye

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

The idea behind Nufarm Finance NZ and Nova Eye Medical 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.