Correlation Between CF Industries and DHC Acquisition

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

Diversification Opportunities for CF Industries and DHC Acquisition

0.0

Correlation Coefficient

CF Industries  DHC Acquisition

Pay attention - limited upside

The 3 months correlation between CF Industries and DHC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and DHC Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHC Acquisition Corp 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 DHC Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHC Acquisition Corp has no effect on the direction of CF Industries i.e., CF Industries and DHC Acquisition go up and down completely randomly.

Pair Corralation between CF Industries and DHC Acquisition

If you would invest (100.00) in DHC Acquisition Corp on December 21, 2024 and sell it today you would earn a total of  100.00  from holding DHC Acquisition Corp or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

CF Industries Holdings  vs.  DHC Acquisition Corp

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.

DHC Acquisition Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days DHC Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, DHC Acquisition is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CF Industries and DHC Acquisition

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

The idea behind CF Industries Holdings and DHC Acquisition Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.