Correlation Between CF Industries and KS AG

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

Diversification Opportunities for CF Industries and KS AG

0.37

Correlation Coefficient

CF Industries  KS AG

Weak diversification

The 3 months correlation between CF Industries and KPLUY is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and KS AG DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KS AG DRC 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 KS AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KS AG DRC has no effect on the direction of CF Industries i.e., CF Industries and KS AG go up and down completely randomly.

Pair Corralation between CF Industries and KS AG

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 0.47 times more return on investment than KS AG. However, CF Industries Holdings is 2.14 times less risky than KS AG. It trades about 0.0 of its potential returns per unit of risk. KS AG DRC is currently generating about 0.0 per unit of risk. If you would invest  9,427  in CF Industries Holdings on September 1, 2024 and sell it today you would lose (461.00) from holding CF Industries Holdings or give up 4.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.18%
Values	Daily Returns

CF Industries Holdings  vs.  KS AG DRC

CF Industries Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 11 (%) 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.

KS AG DRC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KS AG DRC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, KS AG may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with CF Industries and KS AG

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

The idea behind CF Industries Holdings and KS AG DRC 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.