Correlation Between Himalaya Shipping and CF Industries

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

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

Diversification Opportunities for Himalaya Shipping and CF Industries

-0.73

Correlation Coefficient

Himalaya Shipping  CF Industries

Pay attention - limited upside

The 3 months correlation between Himalaya and CF Industries is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Himalaya Shipping 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 Himalaya Shipping 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 Himalaya Shipping 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 Himalaya Shipping i.e., Himalaya Shipping and CF Industries go up and down completely randomly.

Pair Corralation between Himalaya Shipping and CF Industries

Given the investment horizon of 90 days Himalaya Shipping is expected to generate 1.19 times more return on investment than CF Industries. However, Himalaya Shipping is 1.19 times more volatile than CF Industries Holdings. It trades about 0.12 of its potential returns per unit of risk. CF Industries Holdings is currently generating about -0.05 per unit of risk. If you would invest  485.00  in Himalaya Shipping on December 31, 2024 and sell it today you would earn a total of  99.00  from holding Himalaya Shipping or generate 20.41% return on investment over 90 days.

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

Himalaya Shipping  vs.  CF Industries Holdings

Himalaya Shipping

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Himalaya Shipping are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical indicators, Himalaya Shipping reported solid returns over the last few months and may actually be approaching a breakup point.

CF Industries Holdings

Risk-Adjusted Performance

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 latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Himalaya Shipping and CF Industries

The main advantage of trading using opposite Himalaya Shipping and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Himalaya Shipping 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 Himalaya Shipping 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.