Correlation Between CF Industries and Under Armour

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

Diversification Opportunities for CF Industries and Under Armour

0.55

Correlation Coefficient

CF Industries  Under Armour

Very weak diversification

The 3 months correlation between CF Industries and Under is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Under Armour C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Under Armour C 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 Under Armour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Under Armour C has no effect on the direction of CF Industries i.e., CF Industries and Under Armour go up and down completely randomly.

Pair Corralation between CF Industries and Under Armour

Allowing for the 90-day total investment horizon CF Industries is expected to generate 1.13 times less return on investment than Under Armour. But when comparing it to its historical volatility, CF Industries Holdings is 2.3 times less risky than Under Armour. It trades about 0.09 of its potential returns per unit of risk. Under Armour C is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  686.00  in Under Armour C on September 19, 2024 and sell it today you would earn a total of  97.00  from holding Under Armour C or generate 14.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

CF Industries Holdings  vs.  Under Armour C

CF Industries Holdings

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 4 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Under Armour C

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Under Armour C are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Under Armour may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CF Industries and Under Armour

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

The idea behind CF Industries Holdings and Under Armour C 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.