Correlation Between CNH Industrial and Medical Properties

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

Diversification Opportunities for CNH Industrial and Medical Properties

-0.39

Correlation Coefficient

CNH Industrial  Medical Properties

Very good diversification

The 3 months correlation between CNH and Medical is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Medical Properties Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Properties Trust 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 Medical Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Properties Trust has no effect on the direction of CNH Industrial i.e., CNH Industrial and Medical Properties go up and down completely randomly.

Pair Corralation between CNH Industrial and Medical Properties

Assuming the 90 days trading horizon CNH Industrial NV is expected to generate 1.13 times more return on investment than Medical Properties. However, CNH Industrial is 1.13 times more volatile than Medical Properties Trust. It trades about 0.02 of its potential returns per unit of risk. Medical Properties Trust is currently generating about -0.23 per unit of risk. If you would invest  1,055  in CNH Industrial NV on September 17, 2024 and sell it today you would earn a total of  0.00  from holding CNH Industrial NV or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

CNH Industrial NV  vs.  Medical Properties Trust

CNH Industrial NV

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CNH Industrial NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CNH Industrial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Medical Properties Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medical Properties Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 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 Medical Properties

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

The idea behind CNH Industrial NV and Medical Properties Trust 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.