Correlation Between CF Industries and Nutrien

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

Diversification Opportunities for CF Industries and Nutrien

0.13

Correlation Coefficient

CF Industries  Nutrien

Average diversification

The 3 months correlation between CF Industries and Nutrien is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Nutrien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutrien 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 Nutrien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nutrien has no effect on the direction of CF Industries i.e., CF Industries and Nutrien go up and down completely randomly.

Pair Corralation between CF Industries and Nutrien

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to under-perform the Nutrien. In addition to that, CF Industries is 1.34 times more volatile than Nutrien. It trades about -0.08 of its total potential returns per unit of risk. Nutrien is currently generating about 0.14 per unit of volatility. If you would invest  4,609  in Nutrien on November 29, 2024 and sell it today you would earn a total of  710.00  from holding Nutrien or generate 15.4% return on investment over 90 days.

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

CF Industries Holdings  vs.  Nutrien

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Nutrien

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nutrien are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Nutrien reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CF Industries and Nutrien

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

The idea behind CF Industries Holdings and Nutrien 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.