Correlation Between CF Industries and Molson Coors

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

Diversification Opportunities for CF Industries and Molson Coors

0.78

Correlation Coefficient

CF Industries  Molson Coors

Poor diversification

The 3 months correlation between CF Industries and Molson is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Molson Coors Brewing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Brewing 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 Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Brewing has no effect on the direction of CF Industries i.e., CF Industries and Molson Coors go up and down completely randomly.

Pair Corralation between CF Industries and Molson Coors

Allowing for the 90-day total investment horizon CF Industries Holdings is expected to under-perform the Molson Coors. In addition to that, CF Industries is 1.91 times more volatile than Molson Coors Brewing. It trades about -0.18 of its total potential returns per unit of risk. Molson Coors Brewing is currently generating about -0.19 per unit of volatility. If you would invest  6,684  in Molson Coors Brewing on January 20, 2024 and sell it today you would lose (296.00) from holding Molson Coors Brewing or give up 4.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

CF Industries Holdings  vs.  Molson Coors Brewing

CF Industries Holdings

Risk-Adjusted Performance

5 of 100

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.

Molson Coors Brewing

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Brewing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Molson Coors is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with CF Industries and Molson Coors

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

The idea behind CF Industries Holdings and Molson Coors Brewing 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..