Correlation Between Kingboard Chemical and CF Industries

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

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

Diversification Opportunities for Kingboard Chemical and CF Industries

0.01

Correlation Coefficient

Kingboard Chemical  CF Industries

Significant diversification

The 3 months correlation between Kingboard and CF Industries is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Kingboard Chemical Holdings 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 Kingboard Chemical 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 Kingboard Chemical Holdings 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 Kingboard Chemical i.e., Kingboard Chemical and CF Industries go up and down completely randomly.

Pair Corralation between Kingboard Chemical and CF Industries

Assuming the 90 days horizon Kingboard Chemical Holdings is expected to under-perform the CF Industries. But the pink sheet apears to be less risky and, when comparing its historical volatility, Kingboard Chemical Holdings is 1.33 times less risky than CF Industries. The pink sheet trades about -0.02 of its potential returns per unit of risk. The CF Industries Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  8,155  in CF Industries Holdings on October 10, 2024 and sell it today you would earn a total of  720.00  from holding CF Industries Holdings or generate 8.83% return on investment over 90 days.

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

Kingboard Chemical Holdings  vs.  CF Industries Holdings

Kingboard Chemical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingboard Chemical Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Kingboard Chemical is not utilizing all of its potentials. The current 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 Kingboard Chemical and CF Industries

The main advantage of trading using opposite Kingboard Chemical and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingboard Chemical 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 Kingboard Chemical Holdings 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 CEOs Directory module to screen CEOs from public companies around the world.