Correlation Between CF Industries and Xunlei
Can any of the company-specific risk be diversified away by investing in both CF Industries and Xunlei 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 Xunlei 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 Xunlei Ltd Adr, you can compare the effects of market volatilities on CF Industries and Xunlei 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 Xunlei. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Xunlei.
Diversification Opportunities for CF Industries and Xunlei
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CF Industries and Xunlei is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Xunlei Ltd Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xunlei Ltd Adr 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 Xunlei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xunlei Ltd Adr has no effect on the direction of CF Industries i.e., CF Industries and Xunlei go up and down completely randomly.
Pair Corralation between CF Industries and Xunlei
Allowing for the 90-day total investment horizon CF Industries is expected to generate 1.12 times less return on investment than Xunlei. But when comparing it to its historical volatility, CF Industries Holdings is 2.44 times less risky than Xunlei. It trades about 0.14 of its potential returns per unit of risk. Xunlei Ltd Adr is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 191.00 in Xunlei Ltd Adr on September 3, 2024 and sell it today you would earn a total of 7.00 from holding Xunlei Ltd Adr or generate 3.66% 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. Xunlei Ltd Adr
Performance |
| Timeline |
| CF Industries Holdings |
| Xunlei Ltd Adr |
CF Industries and Xunlei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and Xunlei
The main advantage of trading using opposite CF Industries and Xunlei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Xunlei 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 Xunlei will offset losses from the drop in Xunlei's long position.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
| Xunlei vs. Travelzoo | Xunlei vs. Emerald Expositions Events | Xunlei vs. Ziff Davis | Xunlei vs. Direct Digital Holdings |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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