Correlation Between Polar Capital and CNH Industrial

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

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

Diversification Opportunities for Polar Capital and CNH Industrial

0.47

Correlation Coefficient

Polar Capital  CNH Industrial

Very weak diversification

The 3 months correlation between Polar and CNH is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Polar Capital Technology 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 Polar Capital 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 Polar Capital Technology 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 Polar Capital i.e., Polar Capital and CNH Industrial go up and down completely randomly.

Pair Corralation between Polar Capital and CNH Industrial

Assuming the 90 days trading horizon Polar Capital Technology is expected to generate 0.34 times more return on investment than CNH Industrial. However, Polar Capital Technology is 2.92 times less risky than CNH Industrial. It trades about 0.17 of its potential returns per unit of risk. CNH Industrial NV is currently generating about 0.03 per unit of risk. If you would invest  31,120  in Polar Capital Technology on October 10, 2024 and sell it today you would earn a total of  4,230  from holding Polar Capital Technology or generate 13.59% return on investment over 90 days.

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

Polar Capital Technology  vs.  CNH Industrial NV

Polar Capital Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Polar Capital Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Polar Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

CNH Industrial NV

Risk-Adjusted Performance

2 of 100

Insignificant

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

Pair Trading with Polar Capital and CNH Industrial

The main advantage of trading using opposite Polar Capital and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polar Capital 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 Polar Capital Technology 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.