Correlation Between CF Industries and Contango ORE

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

Diversification Opportunities for CF Industries and Contango ORE

0.57

Correlation Coefficient

CF Industries  Contango ORE

Very weak diversification

The 3 months correlation between CF Industries and Contango is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Contango ORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Contango ORE 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 Contango ORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Contango ORE has no effect on the direction of CF Industries i.e., CF Industries and Contango ORE go up and down completely randomly.

Pair Corralation between CF Industries and Contango ORE

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 0.48 times more return on investment than Contango ORE. However, CF Industries Holdings is 2.08 times less risky than Contango ORE. It trades about -0.25 of its potential returns per unit of risk. Contango ORE is currently generating about -0.14 per unit of risk. If you would invest  8,647  in CF Industries Holdings on December 11, 2024 and sell it today you would lose (937.00) from holding CF Industries Holdings or give up 10.84% of portfolio value over 90 days.

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

CF Industries Holdings  vs.  Contango ORE

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Contango ORE

Risk-Adjusted Performance

Very Weak

Over the last 90 days Contango ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with CF Industries and Contango ORE

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

The idea behind CF Industries Holdings and Contango ORE 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.