Correlation Between CF Industries and Bt Brands
Can any of the company-specific risk be diversified away by investing in both CF Industries and Bt Brands 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 Bt Brands 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 Bt Brands, you can compare the effects of market volatilities on CF Industries and Bt Brands 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 Bt Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Bt Brands.
Diversification Opportunities for CF Industries and Bt Brands
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CF Industries and BTBD is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Bt Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bt Brands 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 Bt Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bt Brands has no effect on the direction of CF Industries i.e., CF Industries and Bt Brands go up and down completely randomly.
Pair Corralation between CF Industries and Bt Brands
Allowing for the 90-day total investment horizon CF Industries is expected to generate 5.82 times less return on investment than Bt Brands. But when comparing it to its historical volatility, CF Industries Holdings is 3.13 times less risky than Bt Brands. It trades about 0.01 of its potential returns per unit of risk. Bt Brands is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 180.00 in Bt Brands on September 19, 2024 and sell it today you would lose (21.00) from holding Bt Brands or give up 11.67% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
CF Industries Holdings vs. Bt Brands
Performance |
Timeline |
CF Industries Holdings |
Bt Brands |
CF Industries and Bt Brands Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CF Industries and Bt Brands
The main advantage of trading using opposite CF Industries and Bt Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Bt Brands 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 Bt Brands will offset losses from the drop in Bt Brands' long position.The idea behind CF Industries Holdings and Bt Brands 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.Bt Brands vs. Alsea SAB de | Bt Brands vs. Marstons PLC | Bt Brands vs. Bagger Daves Burger | Bt Brands vs. Marstons PLC |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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