Correlation Between CF Industries and Celanese

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Can any of the company-specific risk be diversified away by investing in both CF Industries and Celanese 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 CF Industries and Celanese into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CF Industries Holdings and Celanese, you can compare the effects of market volatilities on CF Industries and Celanese 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 CF Industries with a short position of Celanese. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Celanese.

Diversification Opportunities for CF Industries and Celanese

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between CF Industries and Celanese is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Celanese in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celanese and CF Industries 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 CF Industries Holdings are associated (or correlated) with Celanese. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celanese has no effect on the direction of CF Industries i.e., CF Industries and Celanese go up and down completely randomly.

Pair Corralation between CF Industries and Celanese

Allowing for the 90-day total investment horizon CF Industries is expected to generate 1.03 times less return on investment than Celanese. In addition to that, CF Industries is 1.19 times more volatile than Celanese. It trades about 0.05 of its total potential returns per unit of risk. Celanese is currently generating about 0.06 per unit of volatility. If you would invest  14,937  in Celanese on January 20, 2024 and sell it today you would earn a total of  525.00  from holding Celanese or generate 3.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy97.67%
ValuesDaily Returns

CF Industries Holdings  vs.  Celanese

 Performance 
       Timeline  
CF Industries Holdings 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CF Industries may actually be approaching a critical reversion point that can send shares even higher in May 2024.
Celanese 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Celanese are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Celanese may actually be approaching a critical reversion point that can send shares even higher in May 2024.

CF Industries and Celanese Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CF Industries and Celanese

The main advantage of trading using opposite CF Industries and Celanese positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Celanese 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 Celanese will offset losses from the drop in Celanese's long position.
The idea behind CF Industries Holdings and Celanese 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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