Correlation Between CF Industries and Porvair Plc

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

Diversification Opportunities for CF Industries and Porvair Plc

-0.19

Correlation Coefficient

CF Industries  Porvair Plc

Good diversification

The 3 months correlation between CF Industries and Porvair is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Porvair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porvair plc 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 Porvair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porvair plc has no effect on the direction of CF Industries i.e., CF Industries and Porvair Plc go up and down completely randomly.

Pair Corralation between CF Industries and Porvair Plc

If you would invest  920.00  in Porvair plc on December 2, 2024 and sell it today you would earn a total of  0.00  from holding Porvair plc or generate 0.0% 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.  Porvair plc

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 latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Porvair plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Porvair plc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Porvair Plc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CF Industries and Porvair Plc

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

The idea behind CF Industries Holdings and Porvair plc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.