Correlation Between CNH Industrial and Metals Exploration
Can any of the company-specific risk be diversified away by investing in both CNH Industrial and Metals Exploration 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 Metals Exploration 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 Metals Exploration Plc, you can compare the effects of market volatilities on CNH Industrial and Metals Exploration 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 Metals Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNH Industrial and Metals Exploration.
Diversification Opportunities for CNH Industrial and Metals Exploration
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between CNH and Metals is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Metals Exploration Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals Exploration 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 Metals Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals Exploration Plc has no effect on the direction of CNH Industrial i.e., CNH Industrial and Metals Exploration go up and down completely randomly.
Pair Corralation between CNH Industrial and Metals Exploration
Assuming the 90 days trading horizon CNH Industrial is expected to generate 1.83 times less return on investment than Metals Exploration. But when comparing it to its historical volatility, CNH Industrial NV is 1.16 times less risky than Metals Exploration. It trades about 0.05 of its potential returns per unit of risk. Metals Exploration Plc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 536.00 in Metals Exploration Plc on December 29, 2024 and sell it today you would earn a total of 84.00 from holding Metals Exploration Plc or generate 15.67% 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. Metals Exploration Plc
Performance |
Timeline |
CNH Industrial NV |
Metals Exploration Plc |
CNH Industrial and Metals Exploration Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CNH Industrial and Metals Exploration
The main advantage of trading using opposite CNH Industrial and Metals Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNH Industrial position performs unexpectedly, Metals Exploration 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 Metals Exploration will offset losses from the drop in Metals Exploration's long position.CNH Industrial vs. BW Offshore | CNH Industrial vs. Travel Leisure Co | CNH Industrial vs. New Residential Investment | CNH Industrial vs. Kaufman Et Broad |
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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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