Correlation Between CF Industries and Vera Bradley
Can any of the company-specific risk be diversified away by investing in both CF Industries and Vera Bradley 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 Vera Bradley 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 Vera Bradley, you can compare the effects of market volatilities on CF Industries and Vera Bradley 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 Vera Bradley. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Vera Bradley.
Diversification Opportunities for CF Industries and Vera Bradley
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CF Industries and Vera is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Vera Bradley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vera Bradley 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 Vera Bradley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vera Bradley has no effect on the direction of CF Industries i.e., CF Industries and Vera Bradley go up and down completely randomly.
Pair Corralation between CF Industries and Vera Bradley
Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 0.54 times more return on investment than Vera Bradley. However, CF Industries Holdings is 1.85 times less risky than Vera Bradley. It trades about 0.06 of its potential returns per unit of risk. Vera Bradley is currently generating about -0.15 per unit of risk. If you would invest 8,649 in CF Industries Holdings on September 13, 2024 and sell it today you would earn a total of 333.00 from holding CF Industries Holdings or generate 3.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
CF Industries Holdings vs. Vera Bradley
Performance |
| Timeline |
| CF Industries Holdings |
| Vera Bradley |
CF Industries and Vera Bradley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and Vera Bradley
The main advantage of trading using opposite CF Industries and Vera Bradley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Vera Bradley 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 Vera Bradley will offset losses from the drop in Vera Bradley's long position.| CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals | CF Industries vs. The Mosaic |
| Vera Bradley vs. Digital Brands Group | Vera Bradley vs. Data Storage | Vera Bradley vs. Auddia Inc | Vera Bradley vs. DatChat Series A |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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