Correlation Between CF Industries and Pono Capital

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

Diversification Opportunities for CF Industries and Pono Capital

-0.16

Correlation Coefficient

CF Industries  Pono Capital

Good diversification

The 3 months correlation between CF Industries and Pono is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Pono Capital Two in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pono Capital Two 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 Pono Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pono Capital Two has no effect on the direction of CF Industries i.e., CF Industries and Pono Capital go up and down completely randomly.

Pair Corralation between CF Industries and Pono Capital

Allowing for the 90-day total investment horizon CF Industries is expected to generate 453.57 times less return on investment than Pono Capital. But when comparing it to its historical volatility, CF Industries Holdings is 109.42 times less risky than Pono Capital. It trades about 0.04 of its potential returns per unit of risk. Pono Capital Two is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3.50  in Pono Capital Two on October 7, 2024 and sell it today you would earn a total of  3.80  from holding Pono Capital Two or generate 108.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	36.56%
Values	Daily Returns

CF Industries Holdings  vs.  Pono Capital Two

CF Industries Holdings

Risk-Adjusted Performance

1 of 100

Weak

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.

Pono Capital Two

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pono Capital Two has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Pono Capital is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with CF Industries and Pono Capital

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

The idea behind CF Industries Holdings and Pono Capital Two 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.