Correlation Between Erste Group and CNH Industrial
Can any of the company-specific risk be diversified away by investing in both Erste Group 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 Erste Group and CNH Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Erste Group Bank and CNH Industrial NV, you can compare the effects of market volatilities on Erste Group 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 Erste Group with a short position of CNH Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and CNH Industrial.
Diversification Opportunities for Erste Group and CNH Industrial
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Erste and CNH is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank 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 Erste Group 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 Erste Group Bank 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 Erste Group i.e., Erste Group and CNH Industrial go up and down completely randomly.
Pair Corralation between Erste Group and CNH Industrial
Assuming the 90 days trading horizon Erste Group Bank is expected to generate 1.47 times more return on investment than CNH Industrial. However, Erste Group is 1.47 times more volatile than CNH Industrial NV. It trades about 0.26 of its potential returns per unit of risk. CNH Industrial NV is currently generating about -0.05 per unit of risk. If you would invest 6,114 in Erste Group Bank on November 29, 2024 and sell it today you would earn a total of 812.00 from holding Erste Group Bank or generate 13.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Erste Group Bank vs. CNH Industrial NV
Performance |
| Timeline |
| Erste Group Bank |
| CNH Industrial NV |
Erste Group and CNH Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erste Group and CNH Industrial
The main advantage of trading using opposite Erste Group and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erste Group 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.| Erste Group vs. Finnair Oyj | Erste Group vs. Wizz Air Holdings | Erste Group vs. Verizon Communications | Erste Group vs. Games Workshop Group |
| CNH Industrial vs. Zinc Media Group | CNH Industrial vs. JD Sports Fashion | CNH Industrial vs. G5 Entertainment AB | CNH Industrial vs. Grand Vision Media |
Check out your portfolio center.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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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