Correlation Between CNH Industrial and Lennar Corp

Can any of the company-specific risk be diversified away by investing in both CNH Industrial and Lennar Corp 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 Lennar Corp 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 Lennar Corp Cl, you can compare the effects of market volatilities on CNH Industrial and Lennar Corp 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 Lennar Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNH Industrial and Lennar Corp.

Diversification Opportunities for CNH Industrial and Lennar Corp

-0.58

Correlation Coefficient

CNH Industrial  Lennar Corp

Excellent diversification

The 3 months correlation between CNH and Lennar is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Lennar Corp Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar Corp Cl 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 Lennar Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar Corp Cl has no effect on the direction of CNH Industrial i.e., CNH Industrial and Lennar Corp go up and down completely randomly.

Pair Corralation between CNH Industrial and Lennar Corp

Assuming the 90 days trading horizon CNH Industrial NV is expected to generate 1.66 times more return on investment than Lennar Corp. However, CNH Industrial is 1.66 times more volatile than Lennar Corp Cl. It trades about 0.07 of its potential returns per unit of risk. Lennar Corp Cl is currently generating about -0.14 per unit of risk. If you would invest  1,055  in CNH Industrial NV on December 22, 2024 and sell it today you would earn a total of  112.00  from holding CNH Industrial NV or generate 10.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

CNH Industrial NV  vs.  Lennar Corp Cl

CNH Industrial NV

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CNH Industrial NV are ranked lower than 5 (%) 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.

Lennar Corp Cl

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lennar Corp Cl has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with CNH Industrial and Lennar Corp

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

The idea behind CNH Industrial NV and Lennar Corp 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.