Correlation Between CF Industries and Boswell J

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

Diversification Opportunities for CF Industries and Boswell J

0.33

Correlation Coefficient

CF Industries  Boswell J

Weak diversification

The 3 months correlation between CF Industries and Boswell is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Boswell J G in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boswell J G 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 Boswell J. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boswell J G has no effect on the direction of CF Industries i.e., CF Industries and Boswell J go up and down completely randomly.

Pair Corralation between CF Industries and Boswell J

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 1.27 times more return on investment than Boswell J. However, CF Industries is 1.27 times more volatile than Boswell J G. It trades about 0.06 of its potential returns per unit of risk. Boswell J G is currently generating about 0.02 per unit of risk. If you would invest  7,957  in CF Industries Holdings on September 1, 2024 and sell it today you would earn a total of  1,009  from holding CF Industries Holdings or generate 12.68% return on investment over 90 days.

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

CF Industries Holdings  vs.  Boswell J G

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.

Boswell J G

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Boswell J G are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Boswell J is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with CF Industries and Boswell J

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

The idea behind CF Industries Holdings and Boswell J G 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.