Correlation Between CF Industries and Semper Paratus

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

Diversification Opportunities for CF Industries and Semper Paratus

0.4

Correlation Coefficient

CF Industries  Semper Paratus

Very weak diversification

The 3 months correlation between CF Industries and Semper is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Semper Paratus Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semper Paratus Acqui 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 Semper Paratus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semper Paratus Acqui has no effect on the direction of CF Industries i.e., CF Industries and Semper Paratus go up and down completely randomly.

Pair Corralation between CF Industries and Semper Paratus

Allowing for the 90-day total investment horizon CF Industries is expected to generate 2.14 times less return on investment than Semper Paratus. In addition to that, CF Industries is 1.59 times more volatile than Semper Paratus Acquisition. It trades about 0.01 of its total potential returns per unit of risk. Semper Paratus Acquisition is currently generating about 0.05 per unit of volatility. If you would invest  1,025  in Semper Paratus Acquisition on September 12, 2024 and sell it today you would earn a total of  74.00  from holding Semper Paratus Acquisition or generate 7.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	29.49%
Values	Daily Returns

CF Industries Holdings  vs.  Semper Paratus Acquisition

CF Industries Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CF Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Semper Paratus Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Semper Paratus Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Semper Paratus is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CF Industries and Semper Paratus

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

The idea behind CF Industries Holdings and Semper Paratus Acquisition 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.