Correlation Between CF Industries and Stora Enso

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

Diversification Opportunities for CF Industries and Stora Enso

-0.4

Correlation Coefficient

CF Industries  Stora Enso

Very good diversification

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

Pair Corralation between CF Industries and Stora Enso

If you would invest  7,927  in CF Industries Holdings on September 15, 2024 and sell it today you would earn a total of  1,023  from holding CF Industries Holdings or generate 12.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

CF Industries Holdings  vs.  Stora Enso Oyj

CF Industries Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 10 (%) 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.

Stora Enso Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stora Enso Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Stora Enso is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CF Industries and Stora Enso

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

The idea behind CF Industries Holdings and Stora Enso Oyj 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.