Correlation Between CNH Industrial and Anheuser Busch

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

Diversification Opportunities for CNH Industrial and Anheuser Busch

-0.57

Correlation Coefficient

CNH Industrial  Anheuser Busch

Excellent diversification

The 3 months correlation between CNH and Anheuser is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Anheuser Busch InBev SANV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch InBev 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 Anheuser Busch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch InBev has no effect on the direction of CNH Industrial i.e., CNH Industrial and Anheuser Busch go up and down completely randomly.

Pair Corralation between CNH Industrial and Anheuser Busch

Assuming the 90 days trading horizon CNH Industrial NV is expected to generate 1.17 times more return on investment than Anheuser Busch. However, CNH Industrial is 1.17 times more volatile than Anheuser Busch InBev SANV. It trades about 0.46 of its potential returns per unit of risk. Anheuser Busch InBev SANV is currently generating about -0.14 per unit of risk. If you would invest  1,065  in CNH Industrial NV on October 24, 2024 and sell it today you would earn a total of  150.00  from holding CNH Industrial NV or generate 14.08% return on investment over 90 days.

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

CNH Industrial NV  vs.  Anheuser Busch InBev SANV

CNH Industrial NV

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CNH Industrial NV are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, CNH Industrial demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Anheuser Busch InBev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch InBev SANV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with CNH Industrial and Anheuser Busch

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

The idea behind CNH Industrial NV and Anheuser Busch InBev SANV 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 CEOs Directory module to screen CEOs from public companies around the world.