Correlation Between CF Industries and AngloGold Ashanti

Can any of the company-specific risk be diversified away by investing in both CF Industries and AngloGold Ashanti 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 AngloGold Ashanti 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 AngloGold Ashanti plc, you can compare the effects of market volatilities on CF Industries and AngloGold Ashanti 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 AngloGold Ashanti. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and AngloGold Ashanti.

Diversification Opportunities for CF Industries and AngloGold Ashanti

0.1

Correlation Coefficient

CF Industries  AngloGold Ashanti

Average diversification

The 3 months correlation between CF Industries and AngloGold is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and AngloGold Ashanti plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AngloGold Ashanti plc 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 AngloGold Ashanti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AngloGold Ashanti plc has no effect on the direction of CF Industries i.e., CF Industries and AngloGold Ashanti go up and down completely randomly.

Pair Corralation between CF Industries and AngloGold Ashanti

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to under-perform the AngloGold Ashanti. But the stock apears to be less risky and, when comparing its historical volatility, CF Industries Holdings is 1.71 times less risky than AngloGold Ashanti. The stock trades about -0.04 of its potential returns per unit of risk. The AngloGold Ashanti plc is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,753  in AngloGold Ashanti plc on February 11, 2024 and sell it today you would earn a total of  685.00  from holding AngloGold Ashanti plc or generate 39.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

CF Industries Holdings  vs.  AngloGold Ashanti plc

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

AngloGold Ashanti plc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AngloGold Ashanti plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, AngloGold Ashanti unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CF Industries and AngloGold Ashanti

The main advantage of trading using opposite CF Industries and AngloGold Ashanti positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, AngloGold Ashanti 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 AngloGold Ashanti will offset losses from the drop in AngloGold Ashanti's long position.

The idea behind CF Industries Holdings and AngloGold Ashanti plc 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.