Correlation Between CF Industries and Bridger Aerospace

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

Diversification Opportunities for CF Industries and Bridger Aerospace

0.68

Correlation Coefficient

CF Industries  Bridger Aerospace

Poor diversification

The 3 months correlation between CF Industries and Bridger is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Bridger Aerospace Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridger Aerospace 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 Bridger Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridger Aerospace has no effect on the direction of CF Industries i.e., CF Industries and Bridger Aerospace go up and down completely randomly.

Pair Corralation between CF Industries and Bridger Aerospace

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to under-perform the Bridger Aerospace. But the stock apears to be less risky and, when comparing its historical volatility, CF Industries Holdings is 7.7 times less risky than Bridger Aerospace. The stock trades about -0.05 of its potential returns per unit of risk. The Bridger Aerospace Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5.10  in Bridger Aerospace Group on December 22, 2024 and sell it today you would earn a total of  1.23  from holding Bridger Aerospace Group or generate 24.12% 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.  Bridger Aerospace Group

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 weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Bridger Aerospace

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bridger Aerospace Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Bridger Aerospace showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CF Industries and Bridger Aerospace

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

The idea behind CF Industries Holdings and Bridger Aerospace Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.