Correlation Between CF Industries and CenterPoint Energy
Can any of the company-specific risk be diversified away by investing in both CF Industries and CenterPoint Energy 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 CenterPoint Energy 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 CenterPoint Energy, you can compare the effects of market volatilities on CF Industries and CenterPoint Energy 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 CenterPoint Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and CenterPoint Energy.
Diversification Opportunities for CF Industries and CenterPoint Energy
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CF Industries and CenterPoint is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy 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 CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of CF Industries i.e., CF Industries and CenterPoint Energy go up and down completely randomly.
Pair Corralation between CF Industries and CenterPoint Energy
Allowing for the 90-day total investment horizon CF Industries is expected to generate 6.68 times less return on investment than CenterPoint Energy. In addition to that, CF Industries is 1.48 times more volatile than CenterPoint Energy. It trades about 0.0 of its total potential returns per unit of risk. CenterPoint Energy is currently generating about 0.03 per unit of volatility. If you would invest 2,880 in CenterPoint Energy on August 30, 2024 and sell it today you would earn a total of 386.00 from holding CenterPoint Energy or generate 13.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CF Industries Holdings vs. CenterPoint Energy
Performance |
| Timeline |
| CF Industries Holdings |
| CenterPoint Energy |
CF Industries and CenterPoint Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and CenterPoint Energy
The main advantage of trading using opposite CF Industries and CenterPoint Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, CenterPoint Energy 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 CenterPoint Energy will offset losses from the drop in CenterPoint Energy's long position.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. FMC Corporation |
| CenterPoint Energy vs. DTE Energy | CenterPoint Energy vs. Alliant Energy Corp | CenterPoint Energy vs. Ameren Corp | CenterPoint Energy vs. Pinnacle West Capital |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |