Correlation Between Global Net and CNH Industrial

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

By analyzing existing cross correlation between Global Net Lease and CNH Industrial NV, you can compare the effects of market volatilities on Global Net and CNH Industrial 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 Global Net with a short position of CNH Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Net and CNH Industrial.

Diversification Opportunities for Global Net and CNH Industrial

0.45

Correlation Coefficient

Global Net  CNH Industrial

Very weak diversification

The 3 months correlation between Global and CNH is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease and CNH Industrial NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNH Industrial NV and Global Net 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 Global Net Lease are associated (or correlated) with CNH Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNH Industrial NV has no effect on the direction of Global Net i.e., Global Net and CNH Industrial go up and down completely randomly.

Pair Corralation between Global Net and CNH Industrial

Assuming the 90 days trading horizon Global Net Lease is expected to generate 0.51 times more return on investment than CNH Industrial. However, Global Net Lease is 1.96 times less risky than CNH Industrial. It trades about 0.46 of its potential returns per unit of risk. CNH Industrial NV is currently generating about -0.15 per unit of risk. If you would invest  709.00  in Global Net Lease on December 5, 2024 and sell it today you would earn a total of  110.00  from holding Global Net Lease or generate 15.51% return on investment over 90 days.

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

Global Net Lease  vs.  CNH Industrial NV

Global Net Lease

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Net Lease are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Global Net unveiled solid returns over the last few months and may actually be approaching a breakup point.

CNH Industrial NV

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CNH Industrial NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CNH Industrial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Global Net and CNH Industrial

The main advantage of trading using opposite Global Net and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Net position performs unexpectedly, CNH Industrial 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 CNH Industrial will offset losses from the drop in CNH Industrial's long position.

The idea behind Global Net Lease and CNH Industrial NV 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.