Correlation Between CF Industries and AlphaVest Acquisition

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

Diversification Opportunities for CF Industries and AlphaVest Acquisition

0.62

Correlation Coefficient

CF Industries  AlphaVest Acquisition

Poor diversification

The 3 months correlation between CF Industries and AlphaVest is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and AlphaVest Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AlphaVest Acquisition 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 AlphaVest Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AlphaVest Acquisition has no effect on the direction of CF Industries i.e., CF Industries and AlphaVest Acquisition go up and down completely randomly.

Pair Corralation between CF Industries and AlphaVest Acquisition

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 27.1 times more return on investment than AlphaVest Acquisition. However, CF Industries is 27.1 times more volatile than AlphaVest Acquisition Corp. It trades about 0.15 of its potential returns per unit of risk. AlphaVest Acquisition Corp is currently generating about 0.34 per unit of risk. If you would invest  7,865  in CF Industries Holdings on September 2, 2024 and sell it today you would earn a total of  1,101  from holding CF Industries Holdings or generate 14.0% return on investment over 90 days.

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

CF Industries Holdings  vs.  AlphaVest Acquisition Corp

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.

AlphaVest Acquisition

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in AlphaVest Acquisition Corp are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable primary indicators, AlphaVest Acquisition is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with CF Industries and AlphaVest Acquisition

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

The idea behind CF Industries Holdings and AlphaVest Acquisition Corp 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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.