Correlation Between CF Industries and Shui On

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

Diversification Opportunities for CF Industries and Shui On

0.21

Correlation Coefficient

CF Industries  Shui On

Modest diversification

The 3 months correlation between CF Industries and Shui is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Shui On Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shui On Land 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 Shui On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shui On Land has no effect on the direction of CF Industries i.e., CF Industries and Shui On go up and down completely randomly.

Pair Corralation between CF Industries and Shui On

Allowing for the 90-day total investment horizon CF Industries is expected to generate 62.03 times less return on investment than Shui On. But when comparing it to its historical volatility, CF Industries Holdings is 13.52 times less risky than Shui On. It trades about 0.01 of its potential returns per unit of risk. Shui On Land is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Shui On Land on October 3, 2024 and sell it today you would lose (6.00) from holding Shui On Land or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	28.69%
Values	Daily Returns

CF Industries Holdings  vs.  Shui On Land

CF Industries Holdings

Risk-Adjusted Performance

0 of 100

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.

Shui On Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shui On Land has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Shui On is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CF Industries and Shui On

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

The idea behind CF Industries Holdings and Shui On Land 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.