Correlation Between 50249AAD5 and CF Industries

Can any of the company-specific risk be diversified away by investing in both 50249AAD5 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 50249AAD5 and CF Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LYB INTERNATIONAL FINANCE and CF Industries Holdings, you can compare the effects of market volatilities on 50249AAD5 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 50249AAD5 with a short position of CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of 50249AAD5 and CF Industries.

Diversification Opportunities for 50249AAD5 and CF Industries

-0.07

Correlation Coefficient

50249AAD5  CF Industries

Good diversification

The 3 months correlation between 50249AAD5 and CF Industries is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding LYB INTERNATIONAL FINANCE 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 50249AAD5 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 LYB INTERNATIONAL FINANCE 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 50249AAD5 i.e., 50249AAD5 and CF Industries go up and down completely randomly.

Pair Corralation between 50249AAD5 and CF Industries

Assuming the 90 days trading horizon 50249AAD5 is expected to generate 2.75 times less return on investment than CF Industries. But when comparing it to its historical volatility, LYB INTERNATIONAL FINANCE is 1.31 times less risky than CF Industries. It trades about 0.04 of its potential returns per unit of risk. CF Industries Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,250  in CF Industries Holdings on September 29, 2024 and sell it today you would earn a total of  1,259  from holding CF Industries Holdings or generate 17.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.86%
Values	Daily Returns

LYB INTERNATIONAL FINANCE  vs.  CF Industries Holdings

LYB INTERNATIONAL FINANCE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LYB INTERNATIONAL FINANCE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 50249AAD5 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

0 of 100

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with 50249AAD5 and CF Industries

The main advantage of trading using opposite 50249AAD5 and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 50249AAD5 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 LYB INTERNATIONAL FINANCE 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.