Correlation Between Metals Exploration and CNH Industrial

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

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

Diversification Opportunities for Metals Exploration and CNH Industrial

-0.07

Correlation Coefficient

Metals Exploration  CNH Industrial

Good diversification

The 3 months correlation between Metals and CNH is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Metals Exploration Plc 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 Metals Exploration 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 Metals Exploration Plc 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 Metals Exploration i.e., Metals Exploration and CNH Industrial go up and down completely randomly.

Pair Corralation between Metals Exploration and CNH Industrial

Assuming the 90 days trading horizon Metals Exploration is expected to generate 1.72 times less return on investment than CNH Industrial. In addition to that, Metals Exploration is 1.13 times more volatile than CNH Industrial NV. It trades about 0.03 of its total potential returns per unit of risk. CNH Industrial NV is currently generating about 0.07 per unit of volatility. If you would invest  1,055  in CNH Industrial NV on December 24, 2024 and sell it today you would earn a total of  112.00  from holding CNH Industrial NV or generate 10.62% return on investment over 90 days.

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

Metals Exploration Plc  vs.  CNH Industrial NV

Metals Exploration Plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Metals Exploration Plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Metals Exploration may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CNH Industrial NV

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CNH Industrial NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CNH Industrial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metals Exploration and CNH Industrial

The main advantage of trading using opposite Metals Exploration and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metals Exploration 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 Metals Exploration Plc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.