Correlation Between CF Industries and Yield10 Bioscience

Can any of the company-specific risk be diversified away by investing in both CF Industries and Yield10 Bioscience 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 Yield10 Bioscience 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 Yield10 Bioscience, you can compare the effects of market volatilities on CF Industries and Yield10 Bioscience 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 Yield10 Bioscience. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Yield10 Bioscience.

Diversification Opportunities for CF Industries and Yield10 Bioscience

-0.42

Correlation Coefficient

CF Industries  Yield10 Bioscience

Very good diversification

The 3 months correlation between CF Industries and Yield10 is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Yield10 Bioscience in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yield10 Bioscience 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 Yield10 Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yield10 Bioscience has no effect on the direction of CF Industries i.e., CF Industries and Yield10 Bioscience go up and down completely randomly.

Pair Corralation between CF Industries and Yield10 Bioscience

Allowing for the 90-day total investment horizon CF Industries is expected to generate 41.51 times less return on investment than Yield10 Bioscience. But when comparing it to its historical volatility, CF Industries Holdings is 3.69 times less risky than Yield10 Bioscience. It trades about 0.0 of its potential returns per unit of risk. Yield10 Bioscience is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  166.00  in Yield10 Bioscience on September 1, 2024 and sell it today you would earn a total of  24.00  from holding Yield10 Bioscience or generate 14.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	31.11%
Values	Daily Returns

CF Industries Holdings  vs.  Yield10 Bioscience

CF Industries Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CF Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Yield10 Bioscience

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yield10 Bioscience has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Yield10 Bioscience 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 Yield10 Bioscience

The main advantage of trading using opposite CF Industries and Yield10 Bioscience positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Yield10 Bioscience 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 Yield10 Bioscience will offset losses from the drop in Yield10 Bioscience's long position.

The idea behind CF Industries Holdings and Yield10 Bioscience 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.