Correlation Between Popular Capital and CF Industries

Can any of the company-specific risk be diversified away by investing in both Popular Capital 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 Popular Capital and CF Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Popular Capital Trust and CF Industries Holdings, you can compare the effects of market volatilities on Popular Capital 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 Popular Capital with a short position of CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Popular Capital and CF Industries.

Diversification Opportunities for Popular Capital and CF Industries

0.43

Correlation Coefficient

Popular Capital  CF Industries

Very weak diversification

The 3 months correlation between Popular and CF Industries is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Popular Capital Trust 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 Popular Capital 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 Popular Capital Trust 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 Popular Capital i.e., Popular Capital and CF Industries go up and down completely randomly.

Pair Corralation between Popular Capital and CF Industries

Assuming the 90 days horizon Popular Capital is expected to generate 6.09 times less return on investment than CF Industries. But when comparing it to its historical volatility, Popular Capital Trust is 2.18 times less risky than CF Industries. It trades about 0.05 of its potential returns per unit of risk. CF Industries Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7,994  in CF Industries Holdings on August 23, 2024 and sell it today you would earn a total of  997.00  from holding CF Industries Holdings or generate 12.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Popular Capital Trust  vs.  CF Industries Holdings

Popular Capital Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Popular Capital Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Popular Capital is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

CF Industries Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 10 (%) 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 December 2024.

Pair Trading with Popular Capital and CF Industries

The main advantage of trading using opposite Popular Capital and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Popular Capital 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.

The idea behind Popular Capital Trust and CF Industries Holdings 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..