Correlation Between CF Industries and Joint Stock

Can any of the company-specific risk be diversified away by investing in both CF Industries and Joint Stock 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 Joint Stock 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 Joint Stock, you can compare the effects of market volatilities on CF Industries and Joint Stock 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 Joint Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Joint Stock.

Diversification Opportunities for CF Industries and Joint Stock

-0.06

Correlation Coefficient

CF Industries  Joint Stock

Good diversification

The 3 months correlation between CF Industries and Joint is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Joint Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joint Stock 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 Joint Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joint Stock has no effect on the direction of CF Industries i.e., CF Industries and Joint Stock go up and down completely randomly.

Pair Corralation between CF Industries and Joint Stock

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to under-perform the Joint Stock. But the stock apears to be less risky and, when comparing its historical volatility, CF Industries Holdings is 1.18 times less risky than Joint Stock. The stock trades about -0.17 of its potential returns per unit of risk. The Joint Stock is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  10,383  in Joint Stock on September 22, 2024 and sell it today you would lose (513.00) from holding Joint Stock or give up 4.94% of portfolio value over 90 days.

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

CF Industries Holdings  vs.  Joint Stock

CF Industries Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 2 (%) 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.

Joint Stock

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Joint Stock are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Joint Stock is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with CF Industries and Joint Stock

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

The idea behind CF Industries Holdings and Joint Stock 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.