Correlation Between CNH Industrial and Eiffage SA
Can any of the company-specific risk be diversified away by investing in both CNH Industrial and Eiffage SA 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 Eiffage SA 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 Eiffage SA, you can compare the effects of market volatilities on CNH Industrial and Eiffage SA 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 Eiffage SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNH Industrial and Eiffage SA.
Diversification Opportunities for CNH Industrial and Eiffage SA
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CNH and Eiffage is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Eiffage SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eiffage SA 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 Eiffage SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eiffage SA has no effect on the direction of CNH Industrial i.e., CNH Industrial and Eiffage SA go up and down completely randomly.
Pair Corralation between CNH Industrial and Eiffage SA
Assuming the 90 days trading horizon CNH Industrial NV is expected to generate 2.99 times more return on investment than Eiffage SA. However, CNH Industrial is 2.99 times more volatile than Eiffage SA. It trades about 0.11 of its potential returns per unit of risk. Eiffage SA is currently generating about 0.13 per unit of risk. If you would invest 1,055 in CNH Industrial NV on September 12, 2024 and sell it today you would earn a total of 90.00 from holding CNH Industrial NV or generate 8.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CNH Industrial NV vs. Eiffage SA
Performance |
| Timeline |
| CNH Industrial NV |
| Eiffage SA |
CNH Industrial and Eiffage SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CNH Industrial and Eiffage SA
The main advantage of trading using opposite CNH Industrial and Eiffage SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNH Industrial position performs unexpectedly, Eiffage SA 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 Eiffage SA will offset losses from the drop in Eiffage SA's long position.| CNH Industrial vs. Hong Kong Land | CNH Industrial vs. Neometals | CNH Industrial vs. Coor Service Management | CNH Industrial vs. Fidelity Sustainable USD |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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