Correlation Between CF Industries and Arq
Can any of the company-specific risk be diversified away by investing in both CF Industries and Arq 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 Arq 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 Arq Inc, you can compare the effects of market volatilities on CF Industries and Arq 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 Arq. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Arq.
Diversification Opportunities for CF Industries and Arq
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between CF Industries and Arq is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Arq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arq Inc 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 Arq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arq Inc has no effect on the direction of CF Industries i.e., CF Industries and Arq go up and down completely randomly.
Pair Corralation between CF Industries and Arq
Allowing for the 90-day total investment horizon CF Industries is expected to generate 3.48 times less return on investment than Arq. But when comparing it to its historical volatility, CF Industries Holdings is 2.42 times less risky than Arq. It trades about 0.21 of its potential returns per unit of risk. Arq Inc is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 598.00 in Arq Inc on August 28, 2024 and sell it today you would earn a total of 161.00 from holding Arq Inc or generate 26.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CF Industries Holdings vs. Arq Inc
Performance |
| Timeline |
| CF Industries Holdings |
| Arq Inc |
CF Industries and Arq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and Arq
The main advantage of trading using opposite CF Industries and Arq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Arq 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 Arq will offset losses from the drop in Arq's long position.| 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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