Correlation Between CNH Industrial and Virtus Investment

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

Diversification Opportunities for CNH Industrial and Virtus Investment

0.6

Correlation Coefficient

CNH Industrial  Virtus Investment

Poor diversification

The 3 months correlation between CNH and Virtus is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Virtus Investment Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Investment 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 Virtus Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Investment has no effect on the direction of CNH Industrial i.e., CNH Industrial and Virtus Investment go up and down completely randomly.

Pair Corralation between CNH Industrial and Virtus Investment

Assuming the 90 days horizon CNH Industrial is expected to generate 1.54 times less return on investment than Virtus Investment. In addition to that, CNH Industrial is 1.19 times more volatile than Virtus Investment Partners. It trades about 0.06 of its total potential returns per unit of risk. Virtus Investment Partners is currently generating about 0.12 per unit of volatility. If you would invest  18,298  in Virtus Investment Partners on October 9, 2024 and sell it today you would earn a total of  2,902  from holding Virtus Investment Partners or generate 15.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

CNH Industrial NV  vs.  Virtus Investment Partners

CNH Industrial NV

Risk-Adjusted Performance

5 of 100

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

Virtus Investment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Investment Partners are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Virtus Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CNH Industrial and Virtus Investment

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

The idea behind CNH Industrial NV and Virtus Investment Partners 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.