Correlation Between CNH Industrial and Zegona Communications

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

Diversification Opportunities for CNH Industrial and Zegona Communications

-0.1

Correlation Coefficient

CNH Industrial  Zegona Communications

Good diversification

The 3 months correlation between CNH and Zegona is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Zegona Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zegona Communications 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 Zegona Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zegona Communications Plc has no effect on the direction of CNH Industrial i.e., CNH Industrial and Zegona Communications go up and down completely randomly.

Pair Corralation between CNH Industrial and Zegona Communications

Assuming the 90 days trading horizon CNH Industrial is expected to generate 4.54 times less return on investment than Zegona Communications. In addition to that, CNH Industrial is 1.16 times more volatile than Zegona Communications Plc. It trades about 0.02 of its total potential returns per unit of risk. Zegona Communications Plc is currently generating about 0.12 per unit of volatility. If you would invest  18,400  in Zegona Communications Plc on October 7, 2024 and sell it today you would earn a total of  24,000  from holding Zegona Communications Plc or generate 130.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.6%
Values	Daily Returns

CNH Industrial NV  vs.  Zegona Communications Plc

CNH Industrial NV

Risk-Adjusted Performance

3 of 100

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 uncertain basic indicators, CNH Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Zegona Communications Plc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zegona Communications Plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Zegona Communications exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CNH Industrial and Zegona Communications

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

The idea behind CNH Industrial NV and Zegona Communications 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.