Correlation Between CF Industries and AMCON Distributing

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

Diversification Opportunities for CF Industries and AMCON Distributing

-0.27

Correlation Coefficient

CF Industries  AMCON Distributing

Very good diversification

The 3 months correlation between CF Industries and AMCON is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and AMCON Distributing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMCON Distributing 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 AMCON Distributing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMCON Distributing has no effect on the direction of CF Industries i.e., CF Industries and AMCON Distributing go up and down completely randomly.

Pair Corralation between CF Industries and AMCON Distributing

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 0.56 times more return on investment than AMCON Distributing. However, CF Industries Holdings is 1.77 times less risky than AMCON Distributing. It trades about -0.05 of its potential returns per unit of risk. AMCON Distributing is currently generating about -0.03 per unit of risk. If you would invest  8,423  in CF Industries Holdings on December 27, 2024 and sell it today you would lose (759.00) from holding CF Industries Holdings or give up 9.01% of portfolio value over 90 days.

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

CF Industries Holdings  vs.  AMCON Distributing

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.

AMCON Distributing

Risk-Adjusted Performance

Very Weak

Over the last 90 days AMCON Distributing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with CF Industries and AMCON Distributing

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

The idea behind CF Industries Holdings and AMCON Distributing 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.