Correlation Between CF Financial and CHS

Can any of the company-specific risk be diversified away by investing in both CF Financial and CHS 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 Financial and CHS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CF Financial and CHS Inc Pref, you can compare the effects of market volatilities on CF Financial and CHS 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 Financial with a short position of CHS. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Financial and CHS.

Diversification Opportunities for CF Financial and CHS

-0.21

Correlation Coefficient

CF Financial  CHS

Very good diversification

The 3 months correlation between CFFI and CHS is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding CF Financial and CHS Inc Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHS Inc Pref and CF Financial 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 Financial are associated (or correlated) with CHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHS Inc Pref has no effect on the direction of CF Financial i.e., CF Financial and CHS go up and down completely randomly.

Pair Corralation between CF Financial and CHS

Given the investment horizon of 90 days CF Financial is expected to generate 5.67 times more return on investment than CHS. However, CF Financial is 5.67 times more volatile than CHS Inc Pref. It trades about 0.13 of its potential returns per unit of risk. CHS Inc Pref is currently generating about -0.12 per unit of risk. If you would invest  7,035  in CF Financial on December 2, 2024 and sell it today you would earn a total of  935.00  from holding CF Financial or generate 13.29% return on investment over 90 days.

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

CF Financial  vs.  CHS Inc Pref

CF Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CF Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical and fundamental indicators, CF Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CHS Inc Pref

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CHS Inc Pref are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, CHS is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CF Financial and CHS

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

The idea behind CF Financial and CHS Inc Pref 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.