Correlation Between Alcoa Corp and CF Industries

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp 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 Alcoa Corp and CF Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and CF Industries Holdings, you can compare the effects of market volatilities on Alcoa Corp 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 Alcoa Corp with a short position of CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and CF Industries.

Diversification Opportunities for Alcoa Corp and CF Industries

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between Alcoa and CF Industries is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp i.e., Alcoa Corp and CF Industries go up and down completely randomly.

Pair Corralation between Alcoa Corp and CF Industries

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the CF Industries. In addition to that, Alcoa Corp is 1.54 times more volatile than CF Industries Holdings. It trades about -0.03 of its total potential returns per unit of risk. CF Industries Holdings is currently generating about -0.01 per unit of volatility. If you would invest  10,297  in CF Industries Holdings on December 30, 2023 and sell it today you would lose (1,976) from holding CF Industries Holdings or give up 19.19% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Alcoa Corp  vs.  CF Industries Holdings

 Performance 
       Timeline  
Alcoa Corp 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Alcoa Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
CF Industries Holdings 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, CF Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Alcoa Corp and CF Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alcoa Corp and CF Industries

The main advantage of trading using opposite Alcoa Corp and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp 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 Alcoa Corp 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.
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

Other Complementary Tools

Share Portfolio
Track or share privately all of your investments from the convenience of any device
AI Portfolio Architect
Use AI to generate optimal portfolios and find profitable investment opportunities
Equity Analysis
Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities
Instant Ratings
Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance
My Watchlist Analysis
Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like
Stocks Directory
Find actively traded stocks across global markets
Technical Analysis
Check basic technical indicators and analysis based on most latest market data
Sync Your Broker
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.
Insider Screener
Find insiders across different sectors to evaluate their impact on performance