Correlation Between CF Industries and PennantPark Investment
Can any of the company-specific risk be diversified away by investing in both CF Industries and PennantPark Investment 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 PennantPark Investment 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 PennantPark Investment, you can compare the effects of market volatilities on CF Industries and PennantPark Investment 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 PennantPark Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and PennantPark Investment.
Diversification Opportunities for CF Industries and PennantPark Investment
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CF Industries and PennantPark is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment 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 PennantPark Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennantPark Investment has no effect on the direction of CF Industries i.e., CF Industries and PennantPark Investment go up and down completely randomly.
Pair Corralation between CF Industries and PennantPark Investment
Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 1.29 times more return on investment than PennantPark Investment. However, CF Industries is 1.29 times more volatile than PennantPark Investment. It trades about 0.14 of its potential returns per unit of risk. PennantPark Investment is currently generating about 0.13 per unit of risk. If you would invest 8,591 in CF Industries Holdings on September 3, 2024 and sell it today you would earn a total of 375.00 from holding CF Industries Holdings or generate 4.37% 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. PennantPark Investment
Performance |
| Timeline |
| CF Industries Holdings |
| PennantPark Investment |
CF Industries and PennantPark Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and PennantPark Investment
The main advantage of trading using opposite CF Industries and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, PennantPark Investment 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 PennantPark Investment will offset losses from the drop in PennantPark Investment's long position.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
| PennantPark Investment vs. Sixth Street Specialty | PennantPark Investment vs. New Mountain Finance | PennantPark Investment vs. Carlyle Secured Lending | PennantPark Investment vs. BlackRock TCP Capital |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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