Correlation Between CNH Industrial and CAP LEASE

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

Diversification Opportunities for CNH Industrial and CAP LEASE

-0.49

Correlation Coefficient

CNH Industrial  CAP LEASE

Very good diversification

The 3 months correlation between CNH and CAP is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and CAP LEASE AVIATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAP LEASE AVIATION 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 CAP LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAP LEASE AVIATION has no effect on the direction of CNH Industrial i.e., CNH Industrial and CAP LEASE go up and down completely randomly.

Pair Corralation between CNH Industrial and CAP LEASE

Assuming the 90 days trading horizon CNH Industrial NV is expected to generate 1.5 times more return on investment than CAP LEASE. However, CNH Industrial is 1.5 times more volatile than CAP LEASE AVIATION. It trades about 0.02 of its potential returns per unit of risk. CAP LEASE AVIATION is currently generating about -0.21 per unit of risk. If you would invest  1,055  in CNH Industrial NV on September 3, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

CNH Industrial NV  vs.  CAP LEASE AVIATION

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

CAP LEASE AVIATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAP LEASE AVIATION 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with CNH Industrial and CAP LEASE

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

The idea behind CNH Industrial NV and CAP LEASE AVIATION 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.