Correlation Between CF Industries and Reservoir Media
Can any of the company-specific risk be diversified away by investing in both CF Industries and Reservoir Media 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 Reservoir Media 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 Reservoir Media, you can compare the effects of market volatilities on CF Industries and Reservoir Media 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 Reservoir Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Reservoir Media.
Diversification Opportunities for CF Industries and Reservoir Media
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CF Industries and Reservoir is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Reservoir Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reservoir Media 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 Reservoir Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reservoir Media has no effect on the direction of CF Industries i.e., CF Industries and Reservoir Media go up and down completely randomly.
Pair Corralation between CF Industries and Reservoir Media
Allowing for the 90-day total investment horizon CF Industries is expected to generate 1.9 times less return on investment than Reservoir Media. But when comparing it to its historical volatility, CF Industries Holdings is 1.21 times less risky than Reservoir Media. It trades about 0.21 of its potential returns per unit of risk. Reservoir Media is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 825.00 in Reservoir Media on September 2, 2024 and sell it today you would earn a total of 119.00 from holding Reservoir Media or generate 14.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CF Industries Holdings vs. Reservoir Media
Performance |
| Timeline |
| CF Industries Holdings |
| Reservoir Media |
CF Industries and Reservoir Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and Reservoir Media
The main advantage of trading using opposite CF Industries and Reservoir Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Reservoir Media 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 Reservoir Media will offset losses from the drop in Reservoir Media's long position.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
| Reservoir Media vs. Reading International | Reservoir Media vs. Marcus | Reservoir Media vs. Gaia Inc | Reservoir Media vs. News Corp B |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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