Correlation Between Central Asia and CNH Industrial

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

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

Diversification Opportunities for Central Asia and CNH Industrial

-0.2

Correlation Coefficient

Central Asia  CNH Industrial

Good diversification

The 3 months correlation between Central and CNH is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals 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 Central Asia 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 Central Asia Metals 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 Central Asia i.e., Central Asia and CNH Industrial go up and down completely randomly.

Pair Corralation between Central Asia and CNH Industrial

Assuming the 90 days trading horizon Central Asia Metals is expected to generate 0.64 times more return on investment than CNH Industrial. However, Central Asia Metals is 1.57 times less risky than CNH Industrial. It trades about 0.08 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  15,300  in Central Asia Metals on December 30, 2024 and sell it today you would earn a total of  1,480  from holding Central Asia Metals or generate 9.67% return on investment over 90 days.

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

Central Asia Metals  vs.  CNH Industrial NV

Central Asia Metals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Central Asia Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Central Asia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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. In spite of comparatively unsteady basic indicators, CNH Industrial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Central Asia and CNH Industrial

The main advantage of trading using opposite Central Asia and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Asia 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 Central Asia Metals 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..