Correlation Between CF Industries and American Vanguard
Can any of the company-specific risk be diversified away by investing in both CF Industries and American Vanguard 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 American Vanguard 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 American Vanguard, you can compare the effects of market volatilities on CF Industries and American Vanguard 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 American Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and American Vanguard.
Diversification Opportunities for CF Industries and American Vanguard
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CF Industries and American is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and American Vanguard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Vanguard 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 American Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Vanguard has no effect on the direction of CF Industries i.e., CF Industries and American Vanguard go up and down completely randomly.
Pair Corralation between CF Industries and American Vanguard
Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 1.08 times more return on investment than American Vanguard. However, CF Industries is 1.08 times more volatile than American Vanguard. It trades about -0.18 of its potential returns per unit of risk. American Vanguard is currently generating about -0.37 per unit of risk. If you would invest 8,614 in CF Industries Holdings on January 20, 2024 and sell it today you would lose (655.00) from holding CF Industries Holdings or give up 7.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.3% |
| Values | Daily Returns |
CF Industries Holdings vs. American Vanguard
Performance |
| Timeline |
| CF Industries Holdings |
| American Vanguard |
CF Industries and American Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and American Vanguard
The main advantage of trading using opposite CF Industries and American Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries position performs unexpectedly, American Vanguard 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 American Vanguard will offset losses from the drop in American Vanguard's long position.| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
| American Vanguard vs. CF Industries Holdings | American Vanguard vs. The Mosaic | American Vanguard vs. CVR Partners LP | American Vanguard vs. ICL Israel Chemicals |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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