Correlation Between CNH Industrial and Central Asia

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

Diversification Opportunities for CNH Industrial and Central Asia

-0.2

Correlation Coefficient

CNH Industrial  Central Asia

Good diversification

The 3 months correlation between CNH and Central is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Central Asia Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Asia Metals 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 Central Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Asia Metals has no effect on the direction of CNH Industrial i.e., CNH Industrial and Central Asia go up and down completely randomly.

Pair Corralation between CNH Industrial and Central Asia

Assuming the 90 days trading horizon CNH Industrial is expected to generate 1.02 times less return on investment than Central Asia. In addition to that, CNH Industrial is 1.57 times more volatile than Central Asia Metals. It trades about 0.05 of its total potential returns per unit of risk. Central Asia Metals is currently generating about 0.08 per unit of volatility. If you would invest  15,300  in Central Asia Metals on December 30, 2024 and sell it today you would earn a total of  1,480  from holding Central Asia Metals or generate 9.67% return on investment over 90 days.

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

CNH Industrial NV  vs.  Central Asia Metals

CNH Industrial NV

Risk-Adjusted Performance

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 unsteady basic indicators, CNH Industrial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Central Asia Metals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Central Asia Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Central Asia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CNH Industrial and Central Asia

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

The idea behind CNH Industrial NV and Central Asia Metals 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.