Correlation Between CF Industries and Everspin Technologies

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

Diversification Opportunities for CF Industries and Everspin Technologies

0.51

Correlation Coefficient

CF Industries  Everspin Technologies

Very weak diversification

The 3 months correlation between CF Industries and Everspin is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Everspin Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everspin Technologies 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 Everspin Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everspin Technologies has no effect on the direction of CF Industries i.e., CF Industries and Everspin Technologies go up and down completely randomly.

Pair Corralation between CF Industries and Everspin Technologies

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 0.77 times more return on investment than Everspin Technologies. However, CF Industries Holdings is 1.3 times less risky than Everspin Technologies. It trades about 0.26 of its potential returns per unit of risk. Everspin Technologies is currently generating about 0.14 per unit of risk. If you would invest  8,591  in CF Industries Holdings on September 5, 2024 and sell it today you would earn a total of  823.00  from holding CF Industries Holdings or generate 9.58% return on investment over 90 days.

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

CF Industries Holdings  vs.  Everspin Technologies

CF Industries Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 16 (%) 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.

Everspin Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Everspin Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Everspin Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CF Industries and Everspin Technologies

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

The idea behind CF Industries Holdings and Everspin Technologies 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.