Correlation Between CF Industries and Nufarm

Can any of the company-specific risk be diversified away by investing in both CF Industries and Nufarm 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 Nufarm 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 Nufarm Limited, you can compare the effects of market volatilities on CF Industries and Nufarm 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 Nufarm. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Nufarm.

Diversification Opportunities for CF Industries and Nufarm

-0.44

Correlation Coefficient

CF Industries  Nufarm

Very good diversification

The 3 months correlation between C4F and Nufarm is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited 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 Nufarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Limited has no effect on the direction of CF Industries i.e., CF Industries and Nufarm go up and down completely randomly.

Pair Corralation between CF Industries and Nufarm

Assuming the 90 days horizon CF Industries Holdings is expected to under-perform the Nufarm. In addition to that, CF Industries is 1.47 times more volatile than Nufarm Limited. It trades about -0.07 of its total potential returns per unit of risk. Nufarm Limited is currently generating about 0.05 per unit of volatility. If you would invest  208.00  in Nufarm Limited on December 25, 2024 and sell it today you would earn a total of  10.00  from holding Nufarm Limited or generate 4.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

CF Industries Holdings  vs.  Nufarm Limited

CF Industries Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days CF Industries Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Nufarm Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nufarm Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Nufarm is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CF Industries and Nufarm

The main advantage of trading using opposite CF Industries and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Nufarm 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 Nufarm will offset losses from the drop in Nufarm's long position.

The idea behind CF Industries Holdings and Nufarm Limited 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.