Correlation Between CNH Industrial and Fletcher King

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

Diversification Opportunities for CNH Industrial and Fletcher King

-0.06

Correlation Coefficient

CNH Industrial  Fletcher King

Good diversification

The 3 months correlation between CNH and Fletcher is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Fletcher King Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fletcher King Plc 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 Fletcher King. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fletcher King Plc has no effect on the direction of CNH Industrial i.e., CNH Industrial and Fletcher King go up and down completely randomly.

Pair Corralation between CNH Industrial and Fletcher King

Assuming the 90 days trading horizon CNH Industrial is expected to generate 8.66 times less return on investment than Fletcher King. In addition to that, CNH Industrial is 1.73 times more volatile than Fletcher King Plc. It trades about 0.02 of its total potential returns per unit of risk. Fletcher King Plc is currently generating about 0.24 per unit of volatility. If you would invest  3,300  in Fletcher King Plc on September 12, 2024 and sell it today you would earn a total of  350.00  from holding Fletcher King Plc or generate 10.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

CNH Industrial NV  vs.  Fletcher King Plc

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

Fletcher King Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fletcher King Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain 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 Fletcher King

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

The idea behind CNH Industrial NV and Fletcher King Plc 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.