Correlation Between Sapiens International and CF Industries

Can any of the company-specific risk be diversified away by investing in both Sapiens 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 Sapiens 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 Sapiens International and CF Industries Holdings, you can compare the effects of market volatilities on Sapiens 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 Sapiens International with a short position of CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sapiens International and CF Industries.

Diversification Opportunities for Sapiens International and CF Industries

-0.74

Correlation Coefficient

Sapiens International  CF Industries

Pay attention - limited upside

The 3 months correlation between Sapiens and CF Industries is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sapiens International 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 Sapiens 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 Sapiens International 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 Sapiens International i.e., Sapiens International and CF Industries go up and down completely randomly.

Pair Corralation between Sapiens International and CF Industries

Given the investment horizon of 90 days Sapiens International is expected to generate 0.64 times more return on investment than CF Industries. However, Sapiens International is 1.56 times less risky than CF Industries. It trades about 0.03 of its potential returns per unit of risk. CF Industries Holdings is currently generating about -0.04 per unit of risk. If you would invest  2,674  in Sapiens International on December 30, 2024 and sell it today you would earn a total of  53.00  from holding Sapiens International or generate 1.98% return on investment over 90 days.

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

Sapiens International  vs.  CF Industries Holdings

Sapiens International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sapiens International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sapiens International is not utilizing all of its potentials. The latest 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 Sapiens International and CF Industries

The main advantage of trading using opposite Sapiens International and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sapiens 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 Sapiens International 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.