Correlation Between Austrian Traded and CNH Industrial

Can any of the company-specific risk be diversified away by investing in both Austrian Traded and CNH Industrial 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 Austrian Traded and CNH Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Austrian Traded Index and CNH Industrial NV, you can compare the effects of market volatilities on Austrian Traded and CNH Industrial 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 Austrian Traded with a short position of CNH Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austrian Traded and CNH Industrial.

Diversification Opportunities for Austrian Traded and CNH Industrial

0.38

Correlation Coefficient

Austrian Traded  CNH Industrial

Weak diversification

The 3 months correlation between Austrian and CNH is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Austrian Traded Index and CNH Industrial NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNH Industrial NV and Austrian Traded 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 Austrian Traded Index are associated (or correlated) with CNH Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNH Industrial NV has no effect on the direction of Austrian Traded i.e., Austrian Traded and CNH Industrial go up and down completely randomly.

Pair Corralation between Austrian Traded and CNH Industrial

Assuming the 90 days trading horizon Austrian Traded Index is expected to generate 0.54 times more return on investment than CNH Industrial. However, Austrian Traded Index is 1.86 times less risky than CNH Industrial. It trades about 0.17 of its potential returns per unit of risk. CNH Industrial NV is currently generating about 0.05 per unit of risk. If you would invest  366,301  in Austrian Traded Index on December 30, 2024 and sell it today you would earn a total of  51,292  from holding Austrian Traded Index or generate 14.0% return on investment over 90 days.

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

Austrian Traded Index  vs.  CNH Industrial NV

Pair Trading with Austrian Traded and CNH Industrial

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

The idea behind Austrian Traded Index and CNH Industrial NV 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.