Correlation Between ForFarmers and NV Nederlandsche

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

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

Diversification Opportunities for ForFarmers and NV Nederlandsche

-0.48

Correlation Coefficient

ForFarmers  NV Nederlandsche

Very good diversification

The 3 months correlation between ForFarmers and NEDAP is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding ForFarmers NV and NV Nederlandsche Apparatenfabr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NV Nederlandsche App and ForFarmers 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 ForFarmers NV are associated (or correlated) with NV Nederlandsche. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NV Nederlandsche App has no effect on the direction of ForFarmers i.e., ForFarmers and NV Nederlandsche go up and down completely randomly.

Pair Corralation between ForFarmers and NV Nederlandsche

Assuming the 90 days trading horizon ForFarmers NV is expected to under-perform the NV Nederlandsche. But the stock apears to be less risky and, when comparing its historical volatility, ForFarmers NV is 1.36 times less risky than NV Nederlandsche. The stock trades about -0.03 of its potential returns per unit of risk. The NV Nederlandsche Apparatenfabriek is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  6,100  in NV Nederlandsche Apparatenfabriek on April 22, 2025 and sell it today you would earn a total of  1,980  from holding NV Nederlandsche Apparatenfabriek or generate 32.46% return on investment over 90 days.

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

ForFarmers NV  vs.  NV Nederlandsche Apparatenfabr

ForFarmers NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days ForFarmers NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ForFarmers is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NV Nederlandsche App

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NV Nederlandsche Apparatenfabriek are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NV Nederlandsche sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ForFarmers and NV Nederlandsche

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

The idea behind ForFarmers NV and NV Nederlandsche Apparatenfabriek 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 Anywhere module to track or share privately all of your investments from the convenience of any device.