Correlation Between CNH Industrial and INSURANCE AUST

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

Diversification Opportunities for CNH Industrial and INSURANCE AUST

0.03

Correlation Coefficient

CNH Industrial  INSURANCE AUST

Significant diversification

The 3 months correlation between CNH and INSURANCE is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and INSURANCE AUST GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSURANCE AUST GRP 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 INSURANCE AUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSURANCE AUST GRP has no effect on the direction of CNH Industrial i.e., CNH Industrial and INSURANCE AUST go up and down completely randomly.

Pair Corralation between CNH Industrial and INSURANCE AUST

Assuming the 90 days horizon CNH Industrial NV is expected to generate 0.58 times more return on investment than INSURANCE AUST. However, CNH Industrial NV is 1.74 times less risky than INSURANCE AUST. It trades about 0.0 of its potential returns per unit of risk. INSURANCE AUST GRP is currently generating about -0.16 per unit of risk. If you would invest  1,219  in CNH Industrial NV on December 4, 2024 and sell it today you would lose (6.00) from holding CNH Industrial NV or give up 0.49% of portfolio value over 90 days.

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

CNH Industrial NV  vs.  INSURANCE AUST GRP

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. Despite nearly fragile basic indicators, CNH Industrial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

INSURANCE AUST GRP

Risk-Adjusted Performance

Very Weak

Over the last 90 days INSURANCE AUST GRP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with CNH Industrial and INSURANCE AUST

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

The idea behind CNH Industrial NV and INSURANCE AUST GRP 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 Anywhere module to track or share privately all of your investments from the convenience of any device.