Correlation Between CF Industries and Pearl Diver
Can any of the company-specific risk be diversified away by investing in both CF Industries and Pearl Diver 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 Pearl Diver 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 Pearl Diver Credit, you can compare the effects of market volatilities on CF Industries and Pearl Diver 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 Pearl Diver. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Pearl Diver.
Diversification Opportunities for CF Industries and Pearl Diver
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CF Industries and Pearl is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Pearl Diver Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearl Diver Credit 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 Pearl Diver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pearl Diver Credit has no effect on the direction of CF Industries i.e., CF Industries and Pearl Diver go up and down completely randomly.
Pair Corralation between CF Industries and Pearl Diver
Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 1.16 times more return on investment than Pearl Diver. However, CF Industries is 1.16 times more volatile than Pearl Diver Credit. It trades about 0.09 of its potential returns per unit of risk. Pearl Diver Credit is currently generating about 0.07 per unit of risk. If you would invest 7,592 in CF Industries Holdings on September 3, 2024 and sell it today you would earn a total of 1,374 from holding CF Industries Holdings or generate 18.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 76.8% |
| Values | Daily Returns |
CF Industries Holdings vs. Pearl Diver Credit
Performance |
| Timeline |
| CF Industries Holdings |
| Pearl Diver Credit |
CF Industries and Pearl Diver Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and Pearl Diver
The main advantage of trading using opposite CF Industries and Pearl Diver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Pearl Diver 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 Pearl Diver will offset losses from the drop in Pearl Diver's long position.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
| Pearl Diver vs. NL Industries | Pearl Diver vs. CF Industries Holdings | Pearl Diver vs. Stepan Company | Pearl Diver vs. Ryanair Holdings PLC |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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