Correlation Between CF Industries and EastGroup Properties

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

Diversification Opportunities for CF Industries and EastGroup Properties

-0.68

Correlation Coefficient

CF Industries  EastGroup Properties

Excellent diversification

The 3 months correlation between CF Industries and EastGroup is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and EastGroup Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EastGroup Properties 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 EastGroup Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EastGroup Properties has no effect on the direction of CF Industries i.e., CF Industries and EastGroup Properties go up and down completely randomly.

Pair Corralation between CF Industries and EastGroup Properties

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to under-perform the EastGroup Properties. In addition to that, CF Industries is 1.83 times more volatile than EastGroup Properties. It trades about -0.05 of its total potential returns per unit of risk. EastGroup Properties is currently generating about 0.11 per unit of volatility. If you would invest  15,968  in EastGroup Properties on December 21, 2024 and sell it today you would earn a total of  1,343  from holding EastGroup Properties or generate 8.41% return on investment over 90 days.

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

CF Industries Holdings  vs.  EastGroup Properties

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.

EastGroup Properties

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EastGroup Properties are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, EastGroup Properties may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CF Industries and EastGroup Properties

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

The idea behind CF Industries Holdings and EastGroup Properties 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.