Correlation Between CF Industries and Primo Brands
Can any of the company-specific risk be diversified away by investing in both CF Industries and Primo Brands 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 Primo Brands 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 Primo Brands, you can compare the effects of market volatilities on CF Industries and Primo Brands 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 Primo Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Primo Brands.
Diversification Opportunities for CF Industries and Primo Brands
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CF Industries and Primo is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Primo Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primo Brands 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 Primo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primo Brands has no effect on the direction of CF Industries i.e., CF Industries and Primo Brands go up and down completely randomly.
Pair Corralation between CF Industries and Primo Brands
Allowing for the 90-day total investment horizon CF Industries is expected to generate 30.66 times less return on investment than Primo Brands. In addition to that, CF Industries is 1.15 times more volatile than Primo Brands. It trades about 0.0 of its total potential returns per unit of risk. Primo Brands is currently generating about 0.09 per unit of volatility. If you would invest 1,427 in Primo Brands on August 30, 2024 and sell it today you would earn a total of 1,435 from holding Primo Brands or generate 100.56% 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. Primo Brands
Performance |
| Timeline |
| CF Industries Holdings |
| Primo Brands |
CF Industries and Primo Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and Primo Brands
The main advantage of trading using opposite CF Industries and Primo Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Primo Brands 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 Primo Brands will offset losses from the drop in Primo Brands' long position.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
| Primo Brands vs. Here Media | Primo Brands vs. Dave Busters Entertainment | Primo Brands vs. Southwest Airlines | Primo Brands vs. Playtech 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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