Correlation Between EVS Broadcast and CNH Industrial

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

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

Diversification Opportunities for EVS Broadcast and CNH Industrial

0.19

Correlation Coefficient

EVS Broadcast  CNH Industrial

Average diversification

The 3 months correlation between EVS and CNH is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding EVS Broadcast Equipment 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 EVS Broadcast 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 EVS Broadcast Equipment 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 EVS Broadcast i.e., EVS Broadcast and CNH Industrial go up and down completely randomly.

Pair Corralation between EVS Broadcast and CNH Industrial

Assuming the 90 days trading horizon EVS Broadcast is expected to generate 2.38 times less return on investment than CNH Industrial. But when comparing it to its historical volatility, EVS Broadcast Equipment is 3.25 times less risky than CNH Industrial. It trades about 0.12 of its potential returns per unit of risk. CNH Industrial NV is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,043  in CNH Industrial NV on October 25, 2024 and sell it today you would earn a total of  196.00  from holding CNH Industrial NV or generate 18.79% return on investment over 90 days.

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

EVS Broadcast Equipment  vs.  CNH Industrial NV

EVS Broadcast Equipment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EVS Broadcast Equipment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, EVS Broadcast may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CNH Industrial NV

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CNH Industrial NV are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, CNH Industrial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EVS Broadcast and CNH Industrial

The main advantage of trading using opposite EVS Broadcast and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EVS Broadcast 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 EVS Broadcast Equipment 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.