Correlation Between CNH Industrial and Charter Communications

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

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

Diversification Opportunities for CNH Industrial and Charter Communications

0.46

Correlation Coefficient

CNH Industrial  Charter Communications

Very weak diversification

The 3 months correlation between CNH and Charter is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Charter Communications Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and CNH Industrial 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 CNH Industrial NV are associated (or correlated) with Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of CNH Industrial i.e., CNH Industrial and Charter Communications go up and down completely randomly.

Pair Corralation between CNH Industrial and Charter Communications

Assuming the 90 days trading horizon CNH Industrial NV is expected to generate 1.47 times more return on investment than Charter Communications. However, CNH Industrial is 1.47 times more volatile than Charter Communications Cl. It trades about 0.02 of its potential returns per unit of risk. Charter Communications Cl is currently generating about 0.01 per unit of risk. If you would invest  1,015  in CNH Industrial NV on October 7, 2024 and sell it today you would earn a total of  40.00  from holding CNH Industrial NV or generate 3.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.56%
Values	Daily Returns

CNH Industrial NV  vs.  Charter Communications Cl

CNH Industrial NV

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CNH Industrial NV are ranked lower than 3 (%) 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 February 2025.

Charter Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications Cl are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Charter Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CNH Industrial and Charter Communications

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

The idea behind CNH Industrial NV and Charter Communications Cl 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.