Correlation Between CF Industries and Minerals Technologies
Can any of the company-specific risk be diversified away by investing in both CF Industries and Minerals Technologies 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 Minerals Technologies 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 Minerals Technologies, you can compare the effects of market volatilities on CF Industries and Minerals Technologies 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 Minerals Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Minerals Technologies.
Diversification Opportunities for CF Industries and Minerals Technologies
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CF Industries and Minerals is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Minerals Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minerals Technologies 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 Minerals Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minerals Technologies has no effect on the direction of CF Industries i.e., CF Industries and Minerals Technologies go up and down completely randomly.
Pair Corralation between CF Industries and Minerals Technologies
Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 1.04 times more return on investment than Minerals Technologies. However, CF Industries is 1.04 times more volatile than Minerals Technologies. It trades about 0.05 of its potential returns per unit of risk. Minerals Technologies is currently generating about 0.05 per unit of risk. If you would invest 6,504 in CF Industries Holdings on August 31, 2024 and sell it today you would earn a total of 2,362 from holding CF Industries Holdings or generate 36.32% 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. Minerals Technologies
Performance |
| Timeline |
| CF Industries Holdings |
| Minerals Technologies |
CF Industries and Minerals Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and Minerals Technologies
The main advantage of trading using opposite CF Industries and Minerals Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Minerals Technologies 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 Minerals Technologies will offset losses from the drop in Minerals Technologies' long position.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
| Minerals Technologies vs. Quaker Chemical | Minerals Technologies vs. Innospec | Minerals Technologies vs. H B Fuller | Minerals Technologies vs. Cabot |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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