Correlation Between Constellium and CF Industries
Can any of the company-specific risk be diversified away by investing in both Constellium 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 Constellium and CF Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Constellium Nv and CF Industries Holdings, you can compare the effects of market volatilities on Constellium 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 Constellium with a short position of CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellium and CF Industries.
Diversification Opportunities for Constellium and CF Industries
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Constellium and CF Industries is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Constellium Nv 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 Constellium 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 Constellium Nv 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 Constellium i.e., Constellium and CF Industries go up and down completely randomly.
Pair Corralation between Constellium and CF Industries
Given the investment horizon of 90 days Constellium Nv is expected to generate 1.12 times more return on investment than CF Industries. However, Constellium is 1.12 times more volatile than CF Industries Holdings. It trades about 0.08 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 1,430 in Constellium Nv on January 26, 2024 and sell it today you would earn a total of 569.00 from holding Constellium Nv or generate 39.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Constellium Nv vs. CF Industries Holdings
Performance |
Timeline |
Constellium Nv |
CF Industries Holdings |
Constellium and CF Industries Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Constellium and CF Industries
The main advantage of trading using opposite Constellium and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellium 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.Constellium vs. Century Aluminum | Constellium vs. Alcoa Corp | Constellium vs. China Hongqiao Group | Constellium vs. Alumina Limited PK |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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