Correlation Between CF Industries and Uranium Energy

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

Diversification Opportunities for CF Industries and Uranium Energy

0.77

Correlation Coefficient

CF Industries  Uranium Energy

Poor diversification

The 3 months correlation between CF Industries and Uranium is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Uranium Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uranium Energy Corp 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 Uranium Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uranium Energy Corp has no effect on the direction of CF Industries i.e., CF Industries and Uranium Energy go up and down completely randomly.

Pair Corralation between CF Industries and Uranium Energy

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 0.57 times more return on investment than Uranium Energy. However, CF Industries Holdings is 1.75 times less risky than Uranium Energy. It trades about -0.05 of its potential returns per unit of risk. Uranium Energy Corp is currently generating about -0.08 per unit of risk. If you would invest  8,433  in CF Industries Holdings on December 21, 2024 and sell it today you would lose (741.00) from holding CF Industries Holdings or give up 8.79% of portfolio value over 90 days.

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

CF Industries Holdings  vs.  Uranium Energy Corp

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 latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Uranium Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Uranium Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with CF Industries and Uranium Energy

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

The idea behind CF Industries Holdings and Uranium Energy Corp 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.