Correlation Between Dupont De and CF Financial

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

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

Diversification Opportunities for Dupont De and CF Financial

-0.06

Correlation Coefficient

Dupont De  CF Financial

Good diversification

The 3 months correlation between Dupont and CFFI is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and CF Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Financial and Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and CF Financial go up and down completely randomly.

Pair Corralation between Dupont De and CF Financial

Allowing for the 90-day total investment horizon Dupont De is expected to generate 10.06 times less return on investment than CF Financial. But when comparing it to its historical volatility, Dupont De Nemours is 1.78 times less risky than CF Financial. It trades about 0.03 of its potential returns per unit of risk. CF Financial is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5,656  in CF Financial on August 31, 2024 and sell it today you would earn a total of  1,644  from holding CF Financial or generate 29.07% return on investment over 90 days.

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

Dupont De Nemours  vs.  CF Financial

Dupont De Nemours

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

CF Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak 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 Dupont De and CF Financial

The main advantage of trading using opposite Dupont De and CF Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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 Dupont De Nemours 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.