Correlation Between CNH Industrial and ZURICH INSURANCE

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

Diversification Opportunities for CNH Industrial and ZURICH INSURANCE

0.81

Correlation Coefficient

CNH Industrial  ZURICH INSURANCE

Very poor diversification

The 3 months correlation between CNH and ZURICH is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and ZURICH INSURANCE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZURICH INSURANCE 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 ZURICH INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZURICH INSURANCE has no effect on the direction of CNH Industrial i.e., CNH Industrial and ZURICH INSURANCE go up and down completely randomly.

Pair Corralation between CNH Industrial and ZURICH INSURANCE

Assuming the 90 days horizon CNH Industrial NV is expected to generate 1.98 times more return on investment than ZURICH INSURANCE. However, CNH Industrial is 1.98 times more volatile than ZURICH INSURANCE GROUP. It trades about 0.25 of its potential returns per unit of risk. ZURICH INSURANCE GROUP is currently generating about 0.01 per unit of risk. If you would invest  1,077  in CNH Industrial NV on October 20, 2024 and sell it today you would earn a total of  117.00  from holding CNH Industrial NV or generate 10.86% return on investment over 90 days.

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

CNH Industrial NV  vs.  ZURICH INSURANCE GROUP

CNH Industrial NV

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CNH Industrial NV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CNH Industrial reported solid returns over the last few months and may actually be approaching a breakup point.

ZURICH INSURANCE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ZURICH INSURANCE GROUP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ZURICH INSURANCE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CNH Industrial and ZURICH INSURANCE

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

The idea behind CNH Industrial NV and ZURICH INSURANCE GROUP 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.