Correlation Between CF Industries and Pinterest

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

Diversification Opportunities for CF Industries and Pinterest

-0.09

Correlation Coefficient

CF Industries  Pinterest

Good diversification

The 3 months correlation between CF Industries and Pinterest is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Pinterest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinterest 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 Pinterest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinterest has no effect on the direction of CF Industries i.e., CF Industries and Pinterest go up and down completely randomly.

Pair Corralation between CF Industries and Pinterest

Allowing for the 90-day total investment horizon CF Industries is expected to generate 3.34 times less return on investment than Pinterest. But when comparing it to its historical volatility, CF Industries Holdings is 1.48 times less risky than Pinterest. It trades about 0.01 of its potential returns per unit of risk. Pinterest is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,428  in Pinterest on September 20, 2024 and sell it today you would earn a total of  533.00  from holding Pinterest or generate 21.95% 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.  Pinterest

CF Industries Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 3 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pinterest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pinterest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pinterest is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CF Industries and Pinterest

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

The idea behind CF Industries Holdings and Pinterest 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.