Correlation Between CF Industries and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both CF Industries and Guangdong Investment 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 Guangdong Investment 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 Guangdong Investment Limited, you can compare the effects of market volatilities on CF Industries and Guangdong Investment 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 Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Guangdong Investment.
Diversification Opportunities for CF Industries and Guangdong Investment
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CF Industries and Guangdong is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment 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 Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of CF Industries i.e., CF Industries and Guangdong Investment go up and down completely randomly.
Pair Corralation between CF Industries and Guangdong Investment
Allowing for the 90-day total investment horizon CF Industries is expected to generate 3.88 times less return on investment than Guangdong Investment. But when comparing it to its historical volatility, CF Industries Holdings is 4.09 times less risky than Guangdong Investment. It trades about 0.06 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 59.00 in Guangdong Investment Limited on October 22, 2024 and sell it today you would earn a total of 21.00 from holding Guangdong Investment Limited or generate 35.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.56% |
| Values | Daily Returns |
CF Industries Holdings vs. Guangdong Investment Limited
Performance |
| Timeline |
| CF Industries Holdings |
| Guangdong Investment |
CF Industries and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and Guangdong Investment
The main advantage of trading using opposite CF Industries and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Guangdong Investment 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 Guangdong Investment will offset losses from the drop in Guangdong Investment's long position.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
| Guangdong Investment vs. Essential Utilities | Guangdong Investment vs. Guangdong Investment | Guangdong Investment vs. Anhui Conch Cement | Guangdong Investment vs. Beijing Enterprises Water |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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