Correlation Between CF Industries and GameStop Corp
Can any of the company-specific risk be diversified away by investing in both CF Industries and GameStop Corp 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 GameStop Corp 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 GameStop Corp, you can compare the effects of market volatilities on CF Industries and GameStop Corp 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 GameStop Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and GameStop Corp.
Diversification Opportunities for CF Industries and GameStop Corp
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CF Industries and GameStop is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and GameStop Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameStop Corp 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 GameStop Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GameStop Corp has no effect on the direction of CF Industries i.e., CF Industries and GameStop Corp go up and down completely randomly.
Pair Corralation between CF Industries and GameStop Corp
Allowing for the 90-day total investment horizon CF Industries is expected to generate 2.52 times less return on investment than GameStop Corp. But when comparing it to its historical volatility, CF Industries Holdings is 2.31 times less risky than GameStop Corp. It trades about 0.16 of its potential returns per unit of risk. GameStop Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,040 in GameStop Corp on September 12, 2024 and sell it today you would earn a total of 857.00 from holding GameStop Corp or generate 42.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CF Industries Holdings vs. GameStop Corp
Performance |
| Timeline |
| CF Industries Holdings |
| GameStop Corp |
CF Industries and GameStop Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and GameStop Corp
The main advantage of trading using opposite CF Industries and GameStop Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, GameStop Corp 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 GameStop Corp will offset losses from the drop in GameStop Corp's long position.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
| GameStop Corp vs. Arhaus Inc | GameStop Corp vs. Floor Decor Holdings | GameStop Corp vs. Live Ventures | GameStop Corp vs. Macys Inc |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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