Correlation Between CF Industries and NiSource
Can any of the company-specific risk be diversified away by investing in both CF Industries and NiSource 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 NiSource 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 NiSource, you can compare the effects of market volatilities on CF Industries and NiSource 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 NiSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and NiSource.
Diversification Opportunities for CF Industries and NiSource
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CF Industries and NiSource is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource 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 NiSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NiSource has no effect on the direction of CF Industries i.e., CF Industries and NiSource go up and down completely randomly.
Pair Corralation between CF Industries and NiSource
Allowing for the 90-day total investment horizon CF Industries is expected to generate 2.23 times less return on investment than NiSource. In addition to that, CF Industries is 1.89 times more volatile than NiSource. It trades about 0.06 of its total potential returns per unit of risk. NiSource is currently generating about 0.27 per unit of volatility. If you would invest 2,815 in NiSource on September 1, 2024 and sell it today you would earn a total of 994.00 from holding NiSource or generate 35.31% 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. NiSource
Performance |
| Timeline |
| CF Industries Holdings |
| NiSource |
CF Industries and NiSource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and NiSource
The main advantage of trading using opposite CF Industries and NiSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, NiSource 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 NiSource will offset losses from the drop in NiSource's long position.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
| NiSource vs. NorthWestern | NiSource vs. Avista | NiSource vs. Otter Tail | NiSource vs. Companhia Paranaense de |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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