Correlation Between CNH Industrial and Wheaton Precious

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

Diversification Opportunities for CNH Industrial and Wheaton Precious

0.5

Correlation Coefficient

CNH Industrial  Wheaton Precious

Very weak diversification

The 3 months correlation between CNH and Wheaton is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Wheaton Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheaton Precious 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 Wheaton Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheaton Precious Metals has no effect on the direction of CNH Industrial i.e., CNH Industrial and Wheaton Precious go up and down completely randomly.

Pair Corralation between CNH Industrial and Wheaton Precious

Assuming the 90 days trading horizon CNH Industrial is expected to generate 2.9 times less return on investment than Wheaton Precious. In addition to that, CNH Industrial is 1.46 times more volatile than Wheaton Precious Metals. It trades about 0.05 of its total potential returns per unit of risk. Wheaton Precious Metals is currently generating about 0.21 per unit of volatility. If you would invest  448,500  in Wheaton Precious Metals on December 30, 2024 and sell it today you would earn a total of  147,500  from holding Wheaton Precious Metals or generate 32.89% return on investment over 90 days.

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

CNH Industrial NV  vs.  Wheaton Precious 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.

Wheaton Precious Metals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Wheaton Precious exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CNH Industrial and Wheaton Precious

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

The idea behind CNH Industrial NV and Wheaton Precious 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.