Correlation Between CF Industries and Mosaic
Can any of the company-specific risk be diversified away by investing in both CF Industries and Mosaic 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 CF Industries and Mosaic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CF Industries Holdings and The Mosaic, you can compare the effects of market volatilities on CF Industries and Mosaic 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 CF Industries with a short position of Mosaic. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Mosaic.
Diversification Opportunities for CF Industries and Mosaic
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between C4F and Mosaic is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and The Mosaic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mosaic and CF Industries 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 CF Industries Holdings are associated (or correlated) with Mosaic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mosaic has no effect on the direction of CF Industries i.e., CF Industries and Mosaic go up and down completely randomly.
Pair Corralation between CF Industries and Mosaic
Assuming the 90 days horizon CF Industries Holdings is expected to generate 0.61 times more return on investment than Mosaic. However, CF Industries Holdings is 1.63 times less risky than Mosaic. It trades about 0.2 of its potential returns per unit of risk. The Mosaic is currently generating about -0.02 per unit of risk. If you would invest 7,068 in CF Industries Holdings on September 3, 2024 and sell it today you would earn a total of 1,386 from holding CF Industries Holdings or generate 19.61% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
CF Industries Holdings vs. The Mosaic
Performance |
Timeline |
CF Industries Holdings |
Mosaic |
CF Industries and Mosaic Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CF Industries and Mosaic
The main advantage of trading using opposite CF Industries and Mosaic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Mosaic 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 Mosaic will offset losses from the drop in Mosaic's long position.CF Industries vs. Corteva | CF Industries vs. Corteva | CF Industries vs. Nutrien | CF Industries vs. The Mosaic |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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