Correlation Between CF Industries and Plexus Corp
Can any of the company-specific risk be diversified away by investing in both CF Industries and Plexus Corp 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 Plexus Corp 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 Plexus Corp, you can compare the effects of market volatilities on CF Industries and Plexus Corp 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 Plexus Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Plexus Corp.
Diversification Opportunities for CF Industries and Plexus Corp
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CF Industries and Plexus is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Plexus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plexus Corp 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 Plexus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plexus Corp has no effect on the direction of CF Industries i.e., CF Industries and Plexus Corp go up and down completely randomly.
Pair Corralation between CF Industries and Plexus Corp
Allowing for the 90-day total investment horizon CF Industries Holdings is expected to under-perform the Plexus Corp. In addition to that, CF Industries is 2.87 times more volatile than Plexus Corp. It trades about -0.2 of its total potential returns per unit of risk. Plexus Corp is currently generating about -0.34 per unit of volatility. If you would invest 14,355 in Plexus Corp on November 28, 2024 and sell it today you would lose (924.00) from holding Plexus Corp or give up 6.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CF Industries Holdings vs. Plexus Corp
Performance |
| Timeline |
| CF Industries Holdings |
| Plexus Corp |
CF Industries and Plexus Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and Plexus Corp
The main advantage of trading using opposite CF Industries and Plexus Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Plexus Corp 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 Plexus Corp will offset losses from the drop in Plexus Corp's long position.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
| Plexus Corp vs. Celestica | Plexus Corp vs. Benchmark Electronics | Plexus Corp vs. Flex | Plexus Corp vs. Jabil Circuit |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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