Correlation Between CF Industries and Itafos
Can any of the company-specific risk be diversified away by investing in both CF Industries and Itafos 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 Itafos 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 Itafos Inc, you can compare the effects of market volatilities on CF Industries and Itafos 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 Itafos. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Itafos.
Diversification Opportunities for CF Industries and Itafos
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CF Industries and Itafos is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Itafos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itafos Inc 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 Itafos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itafos Inc has no effect on the direction of CF Industries i.e., CF Industries and Itafos go up and down completely randomly.
Pair Corralation between CF Industries and Itafos
Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 0.7 times more return on investment than Itafos. However, CF Industries Holdings is 1.43 times less risky than Itafos. It trades about 0.25 of its potential returns per unit of risk. Itafos Inc is currently generating about 0.04 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 736.00 from holding CF Industries Holdings or generate 9.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CF Industries Holdings vs. Itafos Inc
Performance |
| Timeline |
| CF Industries Holdings |
| Itafos Inc |
CF Industries and Itafos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and Itafos
The main advantage of trading using opposite CF Industries and Itafos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Itafos 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 Itafos will offset losses from the drop in Itafos' long position.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
| Itafos vs. Danakali | Itafos vs. Intrepid Potash | Itafos vs. Verde Agritech | Itafos vs. Yara International ASA |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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