Correlation Between AMCON Distributing and CF Industries

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

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

Diversification Opportunities for AMCON Distributing and CF Industries

-0.33

Correlation Coefficient

AMCON Distributing  CF Industries

Very good diversification

The 3 months correlation between AMCON and CF Industries is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding AMCON Distributing and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries Holdings and AMCON Distributing 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 AMCON Distributing are associated (or correlated) with CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of AMCON Distributing i.e., AMCON Distributing and CF Industries go up and down completely randomly.

Pair Corralation between AMCON Distributing and CF Industries

Considering the 90-day investment horizon AMCON Distributing is expected to generate 20.55 times less return on investment than CF Industries. In addition to that, AMCON Distributing is 2.55 times more volatile than CF Industries Holdings. It trades about 0.0 of its total potential returns per unit of risk. CF Industries Holdings is currently generating about 0.15 per unit of volatility. If you would invest  7,966  in CF Industries Holdings on September 4, 2024 and sell it today you would earn a total of  1,130  from holding CF Industries Holdings or generate 14.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

AMCON Distributing  vs.  CF Industries Holdings

AMCON Distributing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMCON Distributing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, AMCON Distributing is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with AMCON Distributing and CF Industries

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

The idea behind AMCON Distributing and CF Industries Holdings 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.