Correlation Between Yara International and CF Industries

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

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

Diversification Opportunities for Yara International and CF Industries

0.09

Correlation Coefficient

Yara International  CF Industries

Significant diversification

The 3 months correlation between Yara and C4F is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Yara International ASA 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 Yara International 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 Yara International ASA 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 Yara International i.e., Yara International and CF Industries go up and down completely randomly.

Pair Corralation between Yara International and CF Industries

Assuming the 90 days horizon Yara International ASA is expected to generate 0.64 times more return on investment than CF Industries. However, Yara International ASA is 1.55 times less risky than CF Industries. It trades about 0.12 of its potential returns per unit of risk. CF Industries Holdings is currently generating about -0.08 per unit of risk. If you would invest  2,555  in Yara International ASA on December 19, 2024 and sell it today you would earn a total of  309.00  from holding Yara International ASA or generate 12.09% return on investment over 90 days.

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

Yara International ASA  vs.  CF Industries Holdings

Yara International ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yara International ASA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Yara International 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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Yara International and CF Industries

The main advantage of trading using opposite Yara International and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yara International 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 Yara International ASA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.