Correlation Between CHS and CF Financial
Can any of the company-specific risk be diversified away by investing in both CHS and CF Financial 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 CHS and CF Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHS Inc CM and CF Financial, you can compare the effects of market volatilities on CHS and CF Financial 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 CHS with a short position of CF Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHS and CF Financial.
Diversification Opportunities for CHS and CF Financial
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CHS and CFFI is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding CHS Inc CM and CF Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Financial and CHS 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 CHS Inc CM are associated (or correlated) with CF Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Financial has no effect on the direction of CHS i.e., CHS and CF Financial go up and down completely randomly.
Pair Corralation between CHS and CF Financial
Assuming the 90 days horizon CHS Inc CM is expected to under-perform the CF Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, CHS Inc CM is 7.04 times less risky than CF Financial. The preferred stock trades about -0.08 of its potential returns per unit of risk. The CF Financial is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 6,275 in CF Financial on August 31, 2024 and sell it today you would earn a total of 1,025 from holding CF Financial or generate 16.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHS Inc CM vs. CF Financial
Performance |
| Timeline |
| CHS Inc CM |
| CF Financial |
CHS and CF Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHS and CF Financial
The main advantage of trading using opposite CHS and CF Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHS position performs unexpectedly, CF Financial 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 CF Financial will offset losses from the drop in CF Financial's long position.The idea behind CHS Inc CM and CF Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| CF Financial vs. KeyCorp | CF Financial vs. Comerica | CF Financial vs. First Horizon National | CF Financial vs. Western Alliance Bancorporation |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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