Correlation Between Summit Environmental and CF Industries

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

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

Diversification Opportunities for Summit Environmental and CF Industries

0.0

Correlation Coefficient

Summit Environmental  CF Industries

Pay attention - limited upside

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

Pair Corralation between Summit Environmental and CF Industries

If you would invest  0.01  in Summit Environmental on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Summit Environmental or generate 0.0% return on investment over 90 days.

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

Summit Environmental  vs.  CF Industries Holdings

Summit Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Summit Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Summit Environmental is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private 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 Summit Environmental and CF Industries

The main advantage of trading using opposite Summit Environmental and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Environmental 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 Summit Environmental 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.