Correlation Between CF Industries and Ecovyst

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

Diversification Opportunities for CF Industries and Ecovyst

0.56

Correlation Coefficient

CF Industries  Ecovyst

Very weak diversification

The 3 months correlation between CF Industries and Ecovyst is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Ecovyst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecovyst 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 Ecovyst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecovyst has no effect on the direction of CF Industries i.e., CF Industries and Ecovyst go up and down completely randomly.

Pair Corralation between CF Industries and Ecovyst

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 0.93 times more return on investment than Ecovyst. However, CF Industries Holdings is 1.07 times less risky than Ecovyst. It trades about -0.03 of its potential returns per unit of risk. Ecovyst is currently generating about -0.07 per unit of risk. If you would invest  8,351  in CF Industries Holdings on December 28, 2024 and sell it today you would lose (553.00) from holding CF Industries Holdings or give up 6.62% 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.  Ecovyst

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.

Ecovyst

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ecovyst has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic 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 Ecovyst

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

The idea behind CF Industries Holdings and Ecovyst 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.