Correlation Between Corteva and CF Industries
Can any of the company-specific risk be diversified away by investing in both Corteva and CF Industries 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 Corteva and CF Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Corteva and CF Industries Holdings, you can compare the effects of market volatilities on Corteva and CF Industries 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 Corteva with a short position of CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corteva and CF Industries.
Diversification Opportunities for Corteva and CF Industries
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Corteva and C4F is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Corteva and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries Holdings and Corteva 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 Corteva are associated (or correlated) with CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of Corteva i.e., Corteva and CF Industries go up and down completely randomly.
Pair Corralation between Corteva and CF Industries
Assuming the 90 days horizon Corteva is expected to generate 1.54 times less return on investment than CF Industries. In addition to that, Corteva is 1.43 times more volatile than CF Industries Holdings. It trades about 0.04 of its total potential returns per unit of risk. CF Industries Holdings is currently generating about 0.1 per unit of volatility. If you would invest 6,736 in CF Industries Holdings on September 3, 2024 and sell it today you would earn a total of 1,718 from holding CF Industries Holdings or generate 25.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Corteva vs. CF Industries Holdings
Performance |
| Timeline |
| Corteva |
| CF Industries Holdings |
Corteva and CF Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Corteva and CF Industries
The main advantage of trading using opposite Corteva and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corteva position performs unexpectedly, CF Industries 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 CF Industries will offset losses from the drop in CF Industries' long position.| Corteva vs. Sekisui Chemical Co | Corteva vs. Eastman Chemical | Corteva vs. KINGBOARD CHEMICAL | Corteva vs. Sanyo Chemical Industries |
| CF Industries vs. Corteva | CF Industries vs. Corteva | CF Industries vs. Nutrien | CF Industries vs. The Mosaic |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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