Correlation Between CF Industries and Boston Beer

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

Diversification Opportunities for CF Industries and Boston Beer

0.22

Correlation Coefficient

CF Industries  Boston Beer

Modest diversification

The 3 months correlation between CF Industries and Boston is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer 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 Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of CF Industries i.e., CF Industries and Boston Beer go up and down completely randomly.

Pair Corralation between CF Industries and Boston Beer

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 0.85 times more return on investment than Boston Beer. However, CF Industries Holdings is 1.17 times less risky than Boston Beer. It trades about -0.03 of its potential returns per unit of risk. Boston Beer is currently generating about -0.26 per unit of risk. If you would invest  8,937  in CF Industries Holdings on October 6, 2024 and sell it today you would lose (86.00) from holding CF Industries Holdings or give up 0.96% of portfolio value over 90 days.

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

CF Industries Holdings  vs.  Boston Beer

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.

Boston Beer

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Boston Beer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CF Industries and Boston Beer

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

The idea behind CF Industries Holdings and Boston Beer 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.