Correlation Between CF Industries and Global Ship

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

Diversification Opportunities for CF Industries and Global Ship

0.04

Correlation Coefficient

CF Industries  Global Ship

Significant diversification

The 3 months correlation between CF Industries and Global is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Global Ship Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Ship Lease 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 Global Ship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Ship Lease has no effect on the direction of CF Industries i.e., CF Industries and Global Ship go up and down completely randomly.

Pair Corralation between CF Industries and Global Ship

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to under-perform the Global Ship. In addition to that, CF Industries is 2.54 times more volatile than Global Ship Lease. It trades about -0.02 of its total potential returns per unit of risk. Global Ship Lease is currently generating about -0.05 per unit of volatility. If you would invest  2,625  in Global Ship Lease on October 2, 2024 and sell it today you would lose (50.00) from holding Global Ship Lease or give up 1.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

CF Industries Holdings  vs.  Global Ship Lease

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.

Global Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Global Ship is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CF Industries and Global Ship

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

The idea behind CF Industries Holdings and Global Ship Lease 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.