Correlation Between CF Industries and Allient
Can any of the company-specific risk be diversified away by investing in both CF Industries and Allient 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 Allient 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 Allient, you can compare the effects of market volatilities on CF Industries and Allient 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 Allient. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Allient.
Diversification Opportunities for CF Industries and Allient
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CF Industries and Allient is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Allient in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allient 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 Allient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allient has no effect on the direction of CF Industries i.e., CF Industries and Allient go up and down completely randomly.
Pair Corralation between CF Industries and Allient
Allowing for the 90-day total investment horizon CF Industries is expected to generate 4.3 times less return on investment than Allient. But when comparing it to its historical volatility, CF Industries Holdings is 1.66 times less risky than Allient. It trades about 0.25 of its potential returns per unit of risk. Allient is currently generating about 0.66 of returns per unit of risk over similar time horizon. If you would invest 1,756 in Allient on August 30, 2024 and sell it today you would earn a total of 809.00 from holding Allient or generate 46.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
CF Industries Holdings vs. Allient
Performance |
| Timeline |
| CF Industries Holdings |
| Allient |
CF Industries and Allient Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and Allient
The main advantage of trading using opposite CF Industries and Allient positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Allient 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 Allient will offset losses from the drop in Allient's long position.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
| Allient vs. Vicor | Allient vs. LSI Industries | Allient vs. Shenzhen Genvict Technologies | Allient vs. Topsec Technologies Group |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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