Correlation Between Baozun and CF Industries
Can any of the company-specific risk be diversified away by investing in both Baozun 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 Baozun and CF Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baozun Inc and CF Industries Holdings, you can compare the effects of market volatilities on Baozun 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 Baozun with a short position of CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baozun and CF Industries.
Diversification Opportunities for Baozun and CF Industries
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Baozun and CF Industries is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Baozun Inc 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 Baozun 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 Baozun Inc 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 Baozun i.e., Baozun and CF Industries go up and down completely randomly.
Pair Corralation between Baozun and CF Industries
Given the investment horizon of 90 days Baozun Inc is expected to under-perform the CF Industries. In addition to that, Baozun is 2.52 times more volatile than CF Industries Holdings. It trades about -0.18 of its total potential returns per unit of risk. CF Industries Holdings is currently generating about 0.14 per unit of volatility. If you would invest 8,591 in CF Industries Holdings on September 3, 2024 and sell it today you would earn a total of 375.00 from holding CF Industries Holdings or generate 4.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baozun Inc vs. CF Industries Holdings
Performance |
| Timeline |
| Baozun Inc |
| CF Industries Holdings |
Baozun and CF Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baozun and CF Industries
The main advantage of trading using opposite Baozun and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baozun 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.The idea behind Baozun Inc and CF Industries Holdings 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.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
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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