Correlation Between CF Industries and CVR Partners

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

Diversification Opportunities for CF Industries and CVR Partners

0.27

Correlation Coefficient

CF Industries  CVR Partners

Modest diversification

The 3 months correlation between CF Industries and CVR is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and CVR Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Partners LP 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 CVR Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Partners LP has no effect on the direction of CF Industries i.e., CF Industries and CVR Partners go up and down completely randomly.

Pair Corralation between CF Industries and CVR Partners

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to under-perform the CVR Partners. In addition to that, CF Industries is 1.69 times more volatile than CVR Partners LP. It trades about -0.08 of its total potential returns per unit of risk. CVR Partners LP is currently generating about -0.05 per unit of volatility. If you would invest  8,160  in CVR Partners LP on November 28, 2024 and sell it today you would lose (409.00) from holding CVR Partners LP or give up 5.01% 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.  CVR Partners LP

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CVR Partners LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days CVR Partners LP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, CVR Partners is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CF Industries and CVR Partners

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

The idea behind CF Industries Holdings and CVR Partners LP 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.