Correlation Between CF Industries and Data#3

Can any of the company-specific risk be diversified away by investing in both CF Industries and Data#3 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 Data#3 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 Data3 Limited, you can compare the effects of market volatilities on CF Industries and Data#3 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 Data#3. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Data#3.

Diversification Opportunities for CF Industries and Data#3

-0.48

Correlation Coefficient

CF Industries  Data#3

Very good diversification

The 3 months correlation between CF Industries and Data#3 is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Data3 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data3 Limited 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 Data#3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data3 Limited has no effect on the direction of CF Industries i.e., CF Industries and Data#3 go up and down completely randomly.

Pair Corralation between CF Industries and Data#3

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to under-perform the Data#3. In addition to that, CF Industries is 9.52 times more volatile than Data3 Limited. It trades about -0.04 of its total potential returns per unit of risk. Data3 Limited is currently generating about 0.13 per unit of volatility. If you would invest  397.00  in Data3 Limited on December 30, 2024 and sell it today you would earn a total of  8.00  from holding Data3 Limited or generate 2.02% return on investment over 90 days.

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

CF Industries Holdings  vs.  Data3 Limited

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 nearly stable technical and fundamental indicators, CF Industries is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Data3 Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Data3 Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Data#3 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CF Industries and Data#3

The main advantage of trading using opposite CF Industries and Data#3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Data#3 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 Data#3 will offset losses from the drop in Data#3's long position.

The idea behind CF Industries Holdings and Data3 Limited 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.