Correlation Between Save Foods and CF Industries

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

Diversification Opportunities for Save Foods and CF Industries

-0.36

Correlation Coefficient

Save Foods  CF Industries

Very good diversification

The 3 months correlation between Save and CF Industries is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Save Foods 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 Save 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 Save Foods 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 Save Foods i.e., Save Foods and CF Industries go up and down completely randomly.

Pair Corralation between Save Foods and CF Industries

If you would invest  7,865  in CF Industries Holdings on September 3, 2024 and sell it today you would earn a total of  1,231  from holding CF Industries Holdings or generate 15.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Save Foods  vs.  CF Industries Holdings

Save Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Save Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Save Foods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

CF Industries Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CF Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Save Foods and CF Industries

The main advantage of trading using opposite Save Foods and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Save 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 Save Foods 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.