Correlation Between CF Industries and Apple
Can any of the company-specific risk be diversified away by investing in both CF Industries and Apple 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 Apple 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 Apple Inc, you can compare the effects of market volatilities on CF Industries and Apple 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 Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Apple.
Diversification Opportunities for CF Industries and Apple
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CF Industries and Apple is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of CF Industries i.e., CF Industries and Apple go up and down completely randomly.
Pair Corralation between CF Industries and Apple
Allowing for the 90-day total investment horizon CF Industries Holdings is expected to under-perform the Apple. In addition to that, CF Industries is 1.34 times more volatile than Apple Inc. It trades about -0.07 of its total potential returns per unit of risk. Apple Inc is currently generating about -0.01 per unit of volatility. If you would invest 16,971 in Apple Inc on January 26, 2024 and sell it today you would lose (69.00) from holding Apple Inc or give up 0.41% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
CF Industries Holdings vs. Apple Inc
Performance |
Timeline |
CF Industries Holdings |
Apple Inc |
CF Industries and Apple Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CF Industries and Apple
The main advantage of trading using opposite CF Industries and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.The idea behind CF Industries Holdings and Apple Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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