Correlation Between Corporacion America and CF Industries

Can any of the company-specific risk be diversified away by investing in both Corporacion America 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 Corporacion America and CF Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Corporacion America Airports and CF Industries Holdings, you can compare the effects of market volatilities on Corporacion America 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 Corporacion America with a short position of CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporacion America and CF Industries.

Diversification Opportunities for Corporacion America and CF Industries

0.62

Correlation Coefficient

Corporacion America  CF Industries

Poor diversification

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

Pair Corralation between Corporacion America and CF Industries

Given the investment horizon of 90 days Corporacion America Airports is expected to generate 1.64 times more return on investment than CF Industries. However, Corporacion America is 1.64 times more volatile than CF Industries Holdings. It trades about 0.17 of its potential returns per unit of risk. CF Industries Holdings is currently generating about 0.15 per unit of risk. If you would invest  1,456  in Corporacion America Airports on September 4, 2024 and sell it today you would earn a total of  387.00  from holding Corporacion America Airports or generate 26.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Corporacion America Airports  vs.  CF Industries Holdings

Corporacion America

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Corporacion America Airports are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Corporacion America reported solid returns over the last few months and may actually be approaching a breakup point.

CF Industries Holdings

Risk-Adjusted Performance

11 of 100

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.

Pair Trading with Corporacion America and CF Industries

The main advantage of trading using opposite Corporacion America and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporacion America 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 Corporacion America Airports 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..