Correlation Between Waste Management and CF Industries
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and CF Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and CF Industries Holdings, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and CF Industries.
Diversification Opportunities for Waste Management and CF Industries
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Waste and CF Industries is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management 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 Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and CF Industries go up and down completely randomly.
Pair Corralation between Waste Management and CF Industries
Allowing for the 90-day total investment horizon Waste Management is expected to generate 0.73 times more return on investment than CF Industries. However, Waste Management is 1.37 times less risky than CF Industries. It trades about 0.09 of its potential returns per unit of risk. CF Industries Holdings is currently generating about 0.06 per unit of risk. If you would invest 19,983 in Waste Management on September 1, 2024 and sell it today you would earn a total of 2,839 from holding Waste Management or generate 14.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. CF Industries Holdings
Performance |
| Timeline |
| Waste Management |
| CF Industries Holdings |
Waste Management and CF Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and CF Industries
The main advantage of trading using opposite Waste Management and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.| Waste Management vs. CRA International | Waste Management vs. ICF International | Waste Management vs. Forrester Research | Waste Management vs. Huron Consulting Group |
| 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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