Correlation Between Aerofoam Metals and CF Industries

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

By analyzing existing cross correlation between Aerofoam Metals and CF Industries Holdings, you can compare the effects of market volatilities on Aerofoam Metals and CF Industries 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 Aerofoam Metals with a short position of CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerofoam Metals and CF Industries.

Diversification Opportunities for Aerofoam Metals and CF Industries

0.0

Correlation Coefficient

Aerofoam Metals  CF Industries

Pay attention - limited upside

The 3 months correlation between Aerofoam and CF Industries is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Aerofoam Metals and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries Holdings and Aerofoam Metals 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 Aerofoam Metals are associated (or correlated) with CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of Aerofoam Metals i.e., Aerofoam Metals and CF Industries go up and down completely randomly.

Pair Corralation between Aerofoam Metals and CF Industries

If you would invest  8,113  in CF Industries Holdings on September 20, 2024 and sell it today you would earn a total of  330.00  from holding CF Industries Holdings or generate 4.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Aerofoam Metals  vs.  CF Industries Holdings

Aerofoam Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aerofoam Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, Aerofoam Metals is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

CF Industries Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, CF Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aerofoam Metals and CF Industries

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

The idea behind Aerofoam Metals and CF Industries Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.