Correlation Between Corteva and CF Industries

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

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

Diversification Opportunities for Corteva and CF Industries

0.51

Correlation Coefficient

Corteva  CF Industries

Very weak diversification

The 3 months correlation between Corteva and CF Industries is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Corteva 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 Corteva 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 Corteva 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 Corteva i.e., Corteva and CF Industries go up and down completely randomly.

Pair Corralation between Corteva and CF Industries

Given the investment horizon of 90 days Corteva is expected to generate 0.82 times more return on investment than CF Industries. However, Corteva is 1.22 times less risky than CF Industries. It trades about -0.01 of its potential returns per unit of risk. CF Industries Holdings is currently generating about -0.22 per unit of risk. If you would invest  5,741  in Corteva on February 3, 2024 and sell it today you would lose (43.00) from holding Corteva or give up 0.75% of portfolio value over 90 days.

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

Corteva  vs.  CF Industries Holdings

Corteva

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Corteva are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Corteva may actually be approaching a critical reversion point that can send shares even higher in June 2024.

CF Industries Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CF Industries Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, CF Industries is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Corteva and CF Industries

The main advantage of trading using opposite Corteva and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corteva 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 Corteva 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.