Correlation Between CNH Industrial and Raiffeisen Bank

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

Diversification Opportunities for CNH Industrial and Raiffeisen Bank

0.58

Correlation Coefficient

CNH Industrial  Raiffeisen Bank

Very weak diversification

The 3 months correlation between CNH and Raiffeisen is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Raiffeisen Bank International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raiffeisen Bank Inte 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 Raiffeisen Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raiffeisen Bank Inte has no effect on the direction of CNH Industrial i.e., CNH Industrial and Raiffeisen Bank go up and down completely randomly.

Pair Corralation between CNH Industrial and Raiffeisen Bank

Assuming the 90 days trading horizon CNH Industrial is expected to generate 6.74 times less return on investment than Raiffeisen Bank. But when comparing it to its historical volatility, CNH Industrial NV is 1.67 times less risky than Raiffeisen Bank. It trades about 0.06 of its potential returns per unit of risk. Raiffeisen Bank International is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,834  in Raiffeisen Bank International on December 1, 2024 and sell it today you would earn a total of  746.00  from holding Raiffeisen Bank International or generate 40.68% return on investment over 90 days.

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

CNH Industrial NV  vs.  Raiffeisen Bank International

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 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, CNH Industrial is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Raiffeisen Bank Inte

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Raiffeisen Bank International are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Raiffeisen Bank demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CNH Industrial and Raiffeisen Bank

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

The idea behind CNH Industrial NV and Raiffeisen Bank International 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..