Correlation Between CF Industries and Hudson Technologies

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

Diversification Opportunities for CF Industries and Hudson Technologies

-0.12

Correlation Coefficient

CF Industries  Hudson Technologies

Good diversification

The 3 months correlation between CF Industries and Hudson is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Hudson Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudson Technologies 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 Hudson Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudson Technologies has no effect on the direction of CF Industries i.e., CF Industries and Hudson Technologies go up and down completely randomly.

Pair Corralation between CF Industries and Hudson Technologies

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to under-perform the Hudson Technologies. In addition to that, CF Industries is 1.23 times more volatile than Hudson Technologies. It trades about -0.04 of its total potential returns per unit of risk. Hudson Technologies is currently generating about 0.11 per unit of volatility. If you would invest  546.00  in Hudson Technologies on December 30, 2024 and sell it today you would earn a total of  72.00  from holding Hudson Technologies or generate 13.19% return on investment over 90 days.

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

CF Industries Holdings  vs.  Hudson Technologies

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.

Hudson Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hudson Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Hudson Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CF Industries and Hudson Technologies

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

The idea behind CF Industries Holdings and Hudson Technologies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.