Correlation Between Baxter International and CF Industries
Can any of the company-specific risk be diversified away by investing in both Baxter 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 Baxter 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 Baxter International and CF Industries Holdings, you can compare the effects of market volatilities on Baxter 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 Baxter International with a short position of CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baxter International and CF Industries.
Diversification Opportunities for Baxter International and CF Industries
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Baxter and CF Industries is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Baxter 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 Baxter 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 Baxter 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 Baxter International i.e., Baxter International and CF Industries go up and down completely randomly.
Pair Corralation between Baxter International and CF Industries
Considering the 90-day investment horizon Baxter International is expected to generate 0.89 times more return on investment than CF Industries. However, Baxter International is 1.12 times less risky than CF Industries. It trades about 0.07 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 3,852 in Baxter International on January 26, 2024 and sell it today you would earn a total of 241.00 from holding Baxter International or generate 6.26% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Baxter International vs. CF Industries Holdings
Performance |
Timeline |
Baxter International |
CF Industries Holdings |
Baxter International and CF Industries Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Baxter International and CF Industries
The main advantage of trading using opposite Baxter International and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baxter 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.Baxter International vs. Embecta Corp | Baxter International vs. West Pharmaceutical Services | Baxter International vs. ResMed Inc | Baxter International vs. The Cooper Companies |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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