Correlation Between CF Industries and Balchem
Can any of the company-specific risk be diversified away by investing in both CF Industries and Balchem 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 Balchem 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 Balchem, you can compare the effects of market volatilities on CF Industries and Balchem 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 Balchem. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Balchem.
Diversification Opportunities for CF Industries and Balchem
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CF Industries and Balchem is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem 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 Balchem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balchem has no effect on the direction of CF Industries i.e., CF Industries and Balchem go up and down completely randomly.
Pair Corralation between CF Industries and Balchem
Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 1.18 times more return on investment than Balchem. However, CF Industries is 1.18 times more volatile than Balchem. It trades about 0.05 of its potential returns per unit of risk. Balchem is currently generating about 0.03 per unit of risk. If you would invest 7,661 in CF Industries Holdings on October 12, 2024 and sell it today you would earn a total of 1,040 from holding CF Industries Holdings or generate 13.58% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 99.47% |
Values | Daily Returns |
CF Industries Holdings vs. Balchem
Performance |
Timeline |
CF Industries Holdings |
Balchem |
CF Industries and Balchem Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CF Industries and Balchem
The main advantage of trading using opposite CF Industries and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Balchem 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 Balchem will offset losses from the drop in Balchem's long position.CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
Balchem vs. Sensient Technologies | Balchem vs. Innospec | Balchem vs. Minerals Technologies | Balchem vs. Oil Dri |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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