Correlation Between CHS and CF Financial

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

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

Diversification Opportunities for CHS and CF Financial

0.02

Correlation Coefficient

CHS  CF Financial

Significant diversification

The 3 months correlation between CHS and CFFI is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding CHS Inc CL and CF Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Financial and CHS 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 CHS Inc CL are associated (or correlated) with CF Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Financial has no effect on the direction of CHS i.e., CHS and CF Financial go up and down completely randomly.

Pair Corralation between CHS and CF Financial

Assuming the 90 days horizon CHS is expected to generate 34.17 times less return on investment than CF Financial. But when comparing it to its historical volatility, CHS Inc CL is 6.18 times less risky than CF Financial. It trades about 0.04 of its potential returns per unit of risk. CF Financial is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  5,640  in CF Financial on September 12, 2024 and sell it today you would earn a total of  2,085  from holding CF Financial or generate 36.97% return on investment over 90 days.

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

CHS Inc CL  vs.  CF Financial

CHS Inc CL

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CHS Inc CL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, CHS is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

CF Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CF Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical and fundamental indicators, CF Financial demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHS and CF Financial

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

The idea behind CHS Inc CL and CF Financial 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.