Correlation Between CF Industries and Eureka Acquisition

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

Diversification Opportunities for CF Industries and Eureka Acquisition

0.49

Correlation Coefficient

CF Industries  Eureka Acquisition

Very weak diversification

The 3 months correlation between CF Industries and Eureka is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Eureka Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eureka 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 Eureka Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eureka Acquisition Corp has no effect on the direction of CF Industries i.e., CF Industries and Eureka Acquisition go up and down completely randomly.

Pair Corralation between CF Industries and Eureka Acquisition

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to under-perform the Eureka Acquisition. In addition to that, CF Industries is 26.43 times more volatile than Eureka Acquisition Corp. It trades about 0.0 of its total potential returns per unit of risk. Eureka Acquisition Corp is currently generating about 0.18 per unit of volatility. If you would invest  1,014  in Eureka Acquisition Corp on October 10, 2024 and sell it today you would earn a total of  2.00  from holding Eureka Acquisition Corp or generate 0.2% return on investment over 90 days.

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

CF Industries Holdings  vs.  Eureka Acquisition Corp

CF Industries Holdings

Risk-Adjusted Performance

0 of 100

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.

Eureka Acquisition Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eureka Acquisition Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Eureka Acquisition is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with CF Industries and Eureka Acquisition

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

The idea behind CF Industries Holdings and Eureka 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.

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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.