Correlation Between CF Industries and Precision Drilling
Can any of the company-specific risk be diversified away by investing in both CF Industries and Precision Drilling 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 Precision Drilling 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 Precision Drilling, you can compare the effects of market volatilities on CF Industries and Precision Drilling 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 Precision Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Precision Drilling.
Diversification Opportunities for CF Industries and Precision Drilling
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CF Industries and Precision is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling 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 Precision Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision Drilling has no effect on the direction of CF Industries i.e., CF Industries and Precision Drilling go up and down completely randomly.
Pair Corralation between CF Industries and Precision Drilling
Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 0.78 times more return on investment than Precision Drilling. However, CF Industries Holdings is 1.28 times less risky than Precision Drilling. It trades about 0.03 of its potential returns per unit of risk. Precision Drilling is currently generating about 0.02 per unit of risk. If you would invest 7,426 in CF Industries Holdings on November 9, 2024 and sell it today you would earn a total of 986.00 from holding CF Industries Holdings or generate 13.28% 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. Precision Drilling
Performance |
| Timeline |
| CF Industries Holdings |
| Precision Drilling |
CF Industries and Precision Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and Precision Drilling
The main advantage of trading using opposite CF Industries and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Precision Drilling 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 Precision Drilling will offset losses from the drop in Precision Drilling's long position.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
| Precision Drilling vs. Helmerich and Payne | Precision Drilling vs. Nabors Industries | Precision Drilling vs. Seadrill Limited | Precision Drilling vs. Patterson UTI Energy |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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