Correlation Between CEA Industries and CNH Industrial

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

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

Diversification Opportunities for CEA Industries and CNH Industrial

0.03

Correlation Coefficient

CEA Industries  CNH Industrial

Significant diversification

The 3 months correlation between CEA and CNH is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CEA Industries Warrant 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 CEA Industries 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 CEA Industries Warrant 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 CEA Industries i.e., CEA Industries and CNH Industrial go up and down completely randomly.

Pair Corralation between CEA Industries and CNH Industrial

If you would invest  0.62  in CEA Industries Warrant on September 17, 2024 and sell it today you would earn a total of  1.58  from holding CEA Industries Warrant or generate 254.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	3.85%
Values	Daily Returns

CEA Industries Warrant  vs.  CNH Industrial NV

CEA Industries Warrant

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CEA Industries Warrant are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, CEA Industries showed solid returns over the last few months and may actually be approaching a breakup point.

CNH Industrial NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNH Industrial NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, CNH Industrial is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with CEA Industries and CNH Industrial

The main advantage of trading using opposite CEA Industries and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CEA Industries 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 CEA Industries Warrant 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.