Correlation Between Yara International and Nufarm

Can any of the company-specific risk be diversified away by investing in both Yara International 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 Yara International and Nufarm 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 Nufarm Limited, you can compare the effects of market volatilities on Yara International 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 Yara International with a short position of Nufarm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yara International and Nufarm.

Diversification Opportunities for Yara International and Nufarm

-0.19

Correlation Coefficient

Yara International  Nufarm

Good diversification

The 3 months correlation between Yara and Nufarm is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Yara International ASA and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited 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 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 Yara International i.e., Yara International and Nufarm go up and down completely randomly.

Pair Corralation between Yara International and Nufarm

Assuming the 90 days horizon Yara International ASA is expected to generate 1.15 times more return on investment than Nufarm. However, Yara International is 1.15 times more volatile than Nufarm Limited. It trades about 0.07 of its potential returns per unit of risk. Nufarm Limited is currently generating about -0.09 per unit of risk. If you would invest  2,506  in Yara International ASA on July 6, 2024 and sell it today you would earn a total of  436.00  from holding Yara International ASA or generate 17.4% return on investment over 90 days.

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

Yara International ASA  vs.  Nufarm Limited

Yara International ASA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yara International ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Yara International reported solid returns over the last few months and may actually be approaching a breakup point.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in November 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Yara International and Nufarm

The main advantage of trading using opposite Yara International and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yara International 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 Yara International ASA 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.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.