Correlation Between CF Industries and KEYCORP

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

Diversification Opportunities for CF Industries and KEYCORP

0.22

Correlation Coefficient

CF Industries  KEYCORP

Modest diversification

The 3 months correlation between CF Industries and KEYCORP is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and KEYCORP MEDIUM TERM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEYCORP MEDIUM TERM 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 KEYCORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEYCORP MEDIUM TERM has no effect on the direction of CF Industries i.e., CF Industries and KEYCORP go up and down completely randomly.

Pair Corralation between CF Industries and KEYCORP

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 3.12 times more return on investment than KEYCORP. However, CF Industries is 3.12 times more volatile than KEYCORP MEDIUM TERM. It trades about 0.03 of its potential returns per unit of risk. KEYCORP MEDIUM TERM is currently generating about -0.16 per unit of risk. If you would invest  8,630  in CF Industries Holdings on October 8, 2024 and sell it today you would earn a total of  221.00  from holding CF Industries Holdings or generate 2.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

CF Industries Holdings  vs.  KEYCORP MEDIUM TERM

CF Industries Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 2 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

KEYCORP MEDIUM TERM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEYCORP MEDIUM TERM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KEYCORP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CF Industries and KEYCORP

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

The idea behind CF Industries Holdings and KEYCORP MEDIUM TERM 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.