Correlation Between CF Industries and Codexis

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

Diversification Opportunities for CF Industries and Codexis

0.63

Correlation Coefficient

CF Industries  Codexis

Poor diversification

The 3 months correlation between CF Industries and Codexis is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Codexis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Codexis 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 Codexis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Codexis has no effect on the direction of CF Industries i.e., CF Industries and Codexis go up and down completely randomly.

Pair Corralation between CF Industries and Codexis

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to under-perform the Codexis. But the stock apears to be less risky and, when comparing its historical volatility, CF Industries Holdings is 2.48 times less risky than Codexis. The stock trades about -0.01 of its potential returns per unit of risk. The Codexis is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  393.00  in Codexis on September 19, 2024 and sell it today you would earn a total of  168.00  from holding Codexis or generate 42.75% 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.  Codexis

CF Industries Holdings

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, CF Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Codexis

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Codexis are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Codexis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CF Industries and Codexis

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

The idea behind CF Industries Holdings and Codexis 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.