Correlation Between NH Foods and CF Industries

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

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

Diversification Opportunities for NH Foods and CF Industries

0.0

Correlation Coefficient

NH Foods  CF Industries

Pay attention - limited upside

The 3 months correlation between NIPMY and CF Industries is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NH Foods Ltd 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 NH Foods 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 NH Foods Ltd 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 NH Foods i.e., NH Foods and CF Industries go up and down completely randomly.

Pair Corralation between NH Foods and CF Industries

If you would invest  1,700  in NH Foods Ltd on December 27, 2024 and sell it today you would earn a total of  0.00  from holding NH Foods Ltd or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

NH Foods Ltd  vs.  CF Industries Holdings

NH Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days NH Foods Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, NH Foods 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

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 NH Foods and CF Industries

The main advantage of trading using opposite NH Foods and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NH Foods 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 NH Foods Ltd 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.