Correlation Between CF Industries and Southern
Can any of the company-specific risk be diversified away by investing in both CF Industries and Southern 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 Southern 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 Southern Co, you can compare the effects of market volatilities on CF Industries and Southern 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 Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Southern.
Diversification Opportunities for CF Industries and Southern
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CF Industries and Southern is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Southern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern 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 Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of CF Industries i.e., CF Industries and Southern go up and down completely randomly.
Pair Corralation between CF Industries and Southern
Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 2.38 times more return on investment than Southern. However, CF Industries is 2.38 times more volatile than Southern Co. It trades about 0.05 of its potential returns per unit of risk. Southern Co is currently generating about 0.03 per unit of risk. If you would invest 7,559 in CF Industries Holdings on September 2, 2024 and sell it today you would earn a total of 1,407 from holding CF Industries Holdings or generate 18.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CF Industries Holdings vs. Southern Co
Performance |
| Timeline |
| CF Industries Holdings |
| Southern |
CF Industries and Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and Southern
The main advantage of trading using opposite CF Industries and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Southern 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 Southern will offset losses from the drop in Southern's long position.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
| Southern vs. Consumers Energy | Southern vs. CMS Energy | Southern vs. Cadiz Depositary Shares | Southern vs. DTE 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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