Correlation Between GENERAL and CF Industries

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both GENERAL 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 GENERAL and CF Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GENERAL MTRS 5 and CF Industries Holdings, you can compare the effects of market volatilities on GENERAL 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 GENERAL with a short position of CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of GENERAL and CF Industries.

Diversification Opportunities for GENERAL and CF Industries

-0.62
  Correlation Coefficient

Excellent diversification

The 3 months correlation between GENERAL and CF Industries is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding GENERAL MTRS 5 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 GENERAL 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 GENERAL MTRS 5 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 GENERAL i.e., GENERAL and CF Industries go up and down completely randomly.

Pair Corralation between GENERAL and CF Industries

Assuming the 90 days trading horizon GENERAL is expected to generate 24.42 times less return on investment than CF Industries. But when comparing it to its historical volatility, GENERAL MTRS 5 is 2.1 times less risky than CF Industries. It trades about 0.01 of its potential returns per unit of risk. CF Industries Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7,954  in CF Industries Holdings on September 2, 2024 and sell it today you would earn a total of  1,012  from holding CF Industries Holdings or generate 12.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy99.21%
ValuesDaily Returns

GENERAL MTRS 5  vs.  CF Industries Holdings

 Performance 
       Timeline  
GENERAL MTRS 5 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days GENERAL MTRS 5 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
CF Industries Holdings 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CF Industries reported solid returns over the last few months and may actually be approaching a breakup point.

GENERAL and CF Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GENERAL and CF Industries

The main advantage of trading using opposite GENERAL and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GENERAL 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 GENERAL MTRS 5 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.
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 Transaction History module to view history of all your transactions and understand their impact on performance.

Other Complementary Tools

Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Stock Tickers
Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites
Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated
Funds Screener
Find actively-traded funds from around the world traded on over 30 global exchanges
Risk-Return Analysis
View associations between returns expected from investment and the risk you assume