Correlation Between CF Industries and Humatech

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

Diversification Opportunities for CF Industries and Humatech

0.49

Correlation Coefficient

CF Industries  Humatech

Very weak diversification

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

Pair Corralation between CF Industries and Humatech

Allowing for the 90-day total investment horizon CF Industries is expected to generate 1007.7 times less return on investment than Humatech. But when comparing it to its historical volatility, CF Industries Holdings is 114.12 times less risky than Humatech. It trades about 0.02 of its potential returns per unit of risk. Humatech is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Humatech on October 10, 2024 and sell it today you would earn a total of  0.17  from holding Humatech or generate 1700.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

CF Industries Holdings  vs.  Humatech

CF Industries Holdings

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Humatech

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Humatech are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting primary indicators, Humatech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CF Industries and Humatech

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

The idea behind CF Industries Holdings and Humatech 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.