Correlation Between CNH Industrial and Induction Healthcare
Can any of the company-specific risk be diversified away by investing in both CNH Industrial and Induction Healthcare 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 Induction Healthcare 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 Induction Healthcare Group, you can compare the effects of market volatilities on CNH Industrial and Induction Healthcare 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 Induction Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNH Industrial and Induction Healthcare.
Diversification Opportunities for CNH Industrial and Induction Healthcare
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CNH and Induction is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Induction Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Induction Healthcare 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 Induction Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Induction Healthcare has no effect on the direction of CNH Industrial i.e., CNH Industrial and Induction Healthcare go up and down completely randomly.
Pair Corralation between CNH Industrial and Induction Healthcare
Assuming the 90 days trading horizon CNH Industrial is expected to generate 1.68 times less return on investment than Induction Healthcare. But when comparing it to its historical volatility, CNH Industrial NV is 1.89 times less risky than Induction Healthcare. It trades about 0.23 of its potential returns per unit of risk. Induction Healthcare Group is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 750.00 in Induction Healthcare Group on August 30, 2024 and sell it today you would earn a total of 150.00 from holding Induction Healthcare Group or generate 20.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.65% |
Values | Daily Returns |
CNH Industrial NV vs. Induction Healthcare Group
Performance |
Timeline |
CNH Industrial NV |
Induction Healthcare |
CNH Industrial and Induction Healthcare Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CNH Industrial and Induction Healthcare
The main advantage of trading using opposite CNH Industrial and Induction Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNH Industrial position performs unexpectedly, Induction Healthcare 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 Induction Healthcare will offset losses from the drop in Induction Healthcare's long position.CNH Industrial vs. Tungsten West PLC | CNH Industrial vs. Argo Group Limited | CNH Industrial vs. Hardide PLC | CNH Industrial vs. Versarien PLC |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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