Correlation Between CF Industries and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both CF Industries and Iridium Communications 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 Iridium Communications 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 Iridium Communications, you can compare the effects of market volatilities on CF Industries and Iridium Communications 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 Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Iridium Communications.
Diversification Opportunities for CF Industries and Iridium Communications
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CF Industries and Iridium is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications 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 Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of CF Industries i.e., CF Industries and Iridium Communications go up and down completely randomly.
Pair Corralation between CF Industries and Iridium Communications
Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 0.68 times more return on investment than Iridium Communications. However, CF Industries Holdings is 1.46 times less risky than Iridium Communications. It trades about 0.27 of its potential returns per unit of risk. Iridium Communications is currently generating about 0.03 per unit of risk. If you would invest 8,130 in CF Industries Holdings on August 31, 2024 and sell it today you would earn a total of 836.00 from holding CF Industries Holdings or generate 10.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CF Industries Holdings vs. Iridium Communications
Performance |
| Timeline |
| CF Industries Holdings |
| Iridium Communications |
CF Industries and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and Iridium Communications
The main advantage of trading using opposite CF Industries and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Iridium Communications 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
| Iridium Communications vs. Cogent Communications Group | Iridium Communications vs. IDT Corporation | Iridium Communications vs. Cable One | Iridium Communications vs. SK Telecom Co |
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.
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