Correlation Between CF Industries and GigCapital7 Corp

Can any of the company-specific risk be diversified away by investing in both CF Industries and GigCapital7 Corp 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 GigCapital7 Corp 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 GigCapital7 Corp Class, you can compare the effects of market volatilities on CF Industries and GigCapital7 Corp 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 GigCapital7 Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and GigCapital7 Corp.

Diversification Opportunities for CF Industries and GigCapital7 Corp

0.62

Correlation Coefficient

CF Industries  GigCapital7 Corp

Poor diversification

The 3 months correlation between CF Industries and GigCapital7 is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and GigCapital7 Corp Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigCapital7 Corp Class 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 GigCapital7 Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GigCapital7 Corp Class has no effect on the direction of CF Industries i.e., CF Industries and GigCapital7 Corp go up and down completely randomly.

Pair Corralation between CF Industries and GigCapital7 Corp

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 5.95 times more return on investment than GigCapital7 Corp. However, CF Industries is 5.95 times more volatile than GigCapital7 Corp Class. It trades about 0.16 of its potential returns per unit of risk. GigCapital7 Corp Class is currently generating about 0.07 per unit of risk. If you would invest  8,273  in CF Industries Holdings on October 24, 2024 and sell it today you would earn a total of  1,428  from holding CF Industries Holdings or generate 17.26% return on investment over 90 days.

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

CF Industries Holdings  vs.  GigCapital7 Corp Class

CF Industries Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CF Industries reported solid returns over the last few months and may actually be approaching a breakup point.

GigCapital7 Corp Class

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GigCapital7 Corp Class are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, GigCapital7 Corp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CF Industries and GigCapital7 Corp

The main advantage of trading using opposite CF Industries and GigCapital7 Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, GigCapital7 Corp 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 GigCapital7 Corp will offset losses from the drop in GigCapital7 Corp's long position.

The idea behind CF Industries Holdings and GigCapital7 Corp Class 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.