Correlation Between CNH Industrial and Lightning EMotors

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

Diversification Opportunities for CNH Industrial and Lightning EMotors

-0.32

Correlation Coefficient

CNH Industrial  Lightning EMotors

Very good diversification

The 3 months correlation between CNH and Lightning is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Lightning EMotors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lightning EMotors 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 Lightning EMotors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lightning EMotors has no effect on the direction of CNH Industrial i.e., CNH Industrial and Lightning EMotors go up and down completely randomly.

Pair Corralation between CNH Industrial and Lightning EMotors

Given the investment horizon of 90 days CNH Industrial NV is expected to generate 0.3 times more return on investment than Lightning EMotors. However, CNH Industrial NV is 3.29 times less risky than Lightning EMotors. It trades about -0.02 of its potential returns per unit of risk. Lightning EMotors is currently generating about -0.01 per unit of risk. If you would invest  1,501  in CNH Industrial NV on September 20, 2024 and sell it today you would lose (356.00) from holding CNH Industrial NV or give up 23.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	45.48%
Values	Daily Returns

CNH Industrial NV  vs.  Lightning EMotors

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.

Lightning EMotors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lightning EMotors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Lightning EMotors is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with CNH Industrial and Lightning EMotors

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

The idea behind CNH Industrial NV and Lightning EMotors 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.