Correlation Between Global Ship and CF Industries

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

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

Diversification Opportunities for Global Ship and CF Industries

0.04

Correlation Coefficient

Global Ship  CF Industries

Significant diversification

The 3 months correlation between Global and CF Industries is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease 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 Global Ship 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 Global Ship Lease 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 Global Ship i.e., Global Ship and CF Industries go up and down completely randomly.

Pair Corralation between Global Ship and CF Industries

Assuming the 90 days trading horizon Global Ship Lease is expected to generate 0.39 times more return on investment than CF Industries. However, Global Ship Lease is 2.54 times less risky than CF Industries. It trades about -0.05 of its potential returns per unit of risk. CF Industries Holdings is currently generating about -0.02 per unit of risk. If you would invest  2,625  in Global Ship Lease on October 2, 2024 and sell it today you would lose (50.00) from holding Global Ship Lease or give up 1.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Global Ship Lease  vs.  CF Industries Holdings

Global Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Global Ship is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

CF Industries Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CF Industries Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, CF Industries is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Global Ship and CF Industries

The main advantage of trading using opposite Global Ship and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship 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 Global Ship Lease 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.