Correlation Between CNH Industrial and Helios Towers

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

Diversification Opportunities for CNH Industrial and Helios Towers

0.29

Correlation Coefficient

CNH Industrial  Helios Towers

Modest diversification

The 3 months correlation between CNH and Helios is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Helios Towers Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helios Towers 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 Helios Towers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helios Towers Plc has no effect on the direction of CNH Industrial i.e., CNH Industrial and Helios Towers go up and down completely randomly.

Pair Corralation between CNH Industrial and Helios Towers

Assuming the 90 days trading horizon CNH Industrial is expected to generate 1.07 times less return on investment than Helios Towers. In addition to that, CNH Industrial is 2.01 times more volatile than Helios Towers Plc. It trades about 0.07 of its total potential returns per unit of risk. Helios Towers Plc is currently generating about 0.14 per unit of volatility. If you would invest  9,050  in Helios Towers Plc on December 23, 2024 and sell it today you would earn a total of  1,290  from holding Helios Towers Plc or generate 14.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

CNH Industrial NV  vs.  Helios Towers Plc

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 uncertain basic indicators, CNH Industrial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Helios Towers Plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Helios Towers Plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Helios Towers unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CNH Industrial and Helios Towers

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

The idea behind CNH Industrial NV and Helios Towers 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.