Correlation Between Motorsport Gaming and CF Industries

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

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

Diversification Opportunities for Motorsport Gaming and CF Industries

0.6

Correlation Coefficient

Motorsport Gaming  CF Industries

Poor diversification

The 3 months correlation between Motorsport and CF Industries is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Motorsport Gaming Us 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 Motorsport Gaming 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 Motorsport Gaming Us 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 Motorsport Gaming i.e., Motorsport Gaming and CF Industries go up and down completely randomly.

Pair Corralation between Motorsport Gaming and CF Industries

Given the investment horizon of 90 days Motorsport Gaming Us is expected to generate 1.72 times more return on investment than CF Industries. However, Motorsport Gaming is 1.72 times more volatile than CF Industries Holdings. It trades about -0.03 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  125.00  in Motorsport Gaming Us on December 25, 2024 and sell it today you would lose (15.00) from holding Motorsport Gaming Us or give up 12.0% of portfolio value over 90 days.

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

Motorsport Gaming Us  vs.  CF Industries Holdings

Motorsport Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Motorsport Gaming Us has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 weak 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 Motorsport Gaming and CF Industries

The main advantage of trading using opposite Motorsport Gaming and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Motorsport Gaming 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 Motorsport Gaming Us 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.