Correlation Between Stepan and CF Industries
Can any of the company-specific risk be diversified away by investing in both Stepan and CF Industries 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 Stepan and CF Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and CF Industries Holdings, you can compare the effects of market volatilities on Stepan and CF Industries 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 Stepan with a short position of CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and CF Industries.
Diversification Opportunities for Stepan and CF Industries
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Stepan and CF Industries is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries Holdings and Stepan 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 Stepan Company are associated (or correlated) with CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of Stepan i.e., Stepan and CF Industries go up and down completely randomly.
Pair Corralation between Stepan and CF Industries
Considering the 90-day investment horizon Stepan is expected to generate 1.28 times less return on investment than CF Industries. In addition to that, Stepan is 1.49 times more volatile than CF Industries Holdings. It trades about 0.11 of its total potential returns per unit of risk. CF Industries Holdings is currently generating about 0.21 per unit of volatility. If you would invest 8,368 in CF Industries Holdings on August 24, 2024 and sell it today you would earn a total of 628.00 from holding CF Industries Holdings or generate 7.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Stepan Company vs. CF Industries Holdings
Performance |
| Timeline |
| Stepan Company |
| CF Industries Holdings |
Stepan and CF Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and CF Industries
The main advantage of trading using opposite Stepan and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, CF Industries 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 Industries will offset losses from the drop in CF Industries' long position.The idea behind Stepan Company and CF Industries Holdings 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 Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
Other Complementary Tools
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |