Correlation Between CF Industries and Nova Minerals

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

Diversification Opportunities for CF Industries and Nova Minerals

0.64

Correlation Coefficient

CF Industries  Nova Minerals

Poor diversification

The 3 months correlation between CF Industries and Nova is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Nova Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Minerals Limited 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 Nova Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Minerals Limited has no effect on the direction of CF Industries i.e., CF Industries and Nova Minerals go up and down completely randomly.

Pair Corralation between CF Industries and Nova Minerals

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 0.25 times more return on investment than Nova Minerals. However, CF Industries Holdings is 3.93 times less risky than Nova Minerals. It trades about -0.04 of its potential returns per unit of risk. Nova Minerals Limited is currently generating about -0.04 per unit of risk. If you would invest  8,351  in CF Industries Holdings on December 30, 2024 and sell it today you would lose (612.00) from holding CF Industries Holdings or give up 7.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

CF Industries Holdings  vs.  Nova Minerals Limited

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.

Nova Minerals Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nova Minerals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with CF Industries and Nova Minerals

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

The idea behind CF Industries Holdings and Nova Minerals Limited 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.