Correlation Between HEICO and CF Industries

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

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

Diversification Opportunities for HEICO and CF Industries

0.52

Correlation Coefficient

HEICO  CF Industries

Very weak diversification

The 3 months correlation between HEICO and C4F is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding HEICO 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 HEICO 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 HEICO 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 HEICO i.e., HEICO and CF Industries go up and down completely randomly.

Pair Corralation between HEICO and CF Industries

Assuming the 90 days horizon HEICO is expected to generate 1.06 times more return on investment than CF Industries. However, HEICO is 1.06 times more volatile than CF Industries Holdings. It trades about 0.22 of its potential returns per unit of risk. CF Industries Holdings is currently generating about 0.13 per unit of risk. If you would invest  21,422  in HEICO on April 23, 2025 and sell it today you would earn a total of  6,548  from holding HEICO or generate 30.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

HEICO  vs.  CF Industries Holdings

HEICO

Risk-Adjusted Performance

Solid

Over the last 90 days HEICO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, HEICO reported solid returns over the last few months and may actually be approaching a breakup point.

CF Industries Holdings

Risk-Adjusted Performance

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 uncertain basic indicators, CF Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HEICO and CF Industries

The main advantage of trading using opposite HEICO and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEICO 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 HEICO 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.