Correlation Between CF Industries and Summit Environmental

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

Diversification Opportunities for CF Industries and Summit Environmental

0.0

Correlation Coefficient

CF Industries  Summit Environmental

Pay attention - limited upside

The 3 months correlation between CF Industries and Summit is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Summit Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Environmental 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 Summit Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Environmental has no effect on the direction of CF Industries i.e., CF Industries and Summit Environmental go up and down completely randomly.

Pair Corralation between CF Industries and Summit Environmental

If you would invest  0.01  in Summit Environmental on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Summit Environmental or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CF Industries Holdings  vs.  Summit Environmental

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.

Summit Environmental

Risk-Adjusted Performance

Very Weak

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

Pair Trading with CF Industries and Summit Environmental

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

The idea behind CF Industries Holdings and Summit Environmental 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.