Correlation Between Terex and CNH Industrial

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

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

Diversification Opportunities for Terex and CNH Industrial

0.09

Correlation Coefficient

Terex  CNH Industrial

Significant diversification

The 3 months correlation between Terex and CNH is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Terex 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 Terex 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 Terex 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 Terex i.e., Terex and CNH Industrial go up and down completely randomly.

Pair Corralation between Terex and CNH Industrial

Assuming the 90 days horizon Terex is expected to under-perform the CNH Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Terex is 1.18 times less risky than CNH Industrial. The stock trades about -0.13 of its potential returns per unit of risk. The CNH Industrial NV is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,083  in CNH Industrial NV on December 25, 2024 and sell it today you would earn a total of  84.00  from holding CNH Industrial NV or generate 7.76% return on investment over 90 days.

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

Terex  vs.  CNH Industrial NV

Terex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Terex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 nearly fragile basic indicators, CNH Industrial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Terex and CNH Industrial

The main advantage of trading using opposite Terex and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terex 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 Terex 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.