Correlation Between NV Nederlandsche and ForFarmers

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

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

Diversification Opportunities for NV Nederlandsche and ForFarmers

-0.48

Correlation Coefficient

NV Nederlandsche  ForFarmers

Very good diversification

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

Pair Corralation between NV Nederlandsche and ForFarmers

Assuming the 90 days trading horizon NV Nederlandsche Apparatenfabriek is expected to generate 1.36 times more return on investment than ForFarmers. However, NV Nederlandsche is 1.36 times more volatile than ForFarmers NV. It trades about 0.25 of its potential returns per unit of risk. ForFarmers NV is currently generating about -0.03 per unit of risk. 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

NV Nederlandsche Apparatenfabr  vs.  ForFarmers NV

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.

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.

Pair Trading with NV Nederlandsche and ForFarmers

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

The idea behind NV Nederlandsche Apparatenfabriek and ForFarmers NV 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.