Correlation Between CNH Industrial and PureTech Health
Can any of the company-specific risk be diversified away by investing in both CNH Industrial and PureTech Health 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 PureTech Health 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 PureTech Health plc, you can compare the effects of market volatilities on CNH Industrial and PureTech Health 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 PureTech Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNH Industrial and PureTech Health.
Diversification Opportunities for CNH Industrial and PureTech Health
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CNH and PureTech is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and PureTech Health plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PureTech Health plc 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 PureTech Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PureTech Health plc has no effect on the direction of CNH Industrial i.e., CNH Industrial and PureTech Health go up and down completely randomly.
Pair Corralation between CNH Industrial and PureTech Health
Assuming the 90 days trading horizon CNH Industrial NV is expected to generate 1.26 times more return on investment than PureTech Health. However, CNH Industrial is 1.26 times more volatile than PureTech Health plc. It trades about -0.05 of its potential returns per unit of risk. PureTech Health plc is currently generating about -0.07 per unit of risk. If you would invest 1,254 in CNH Industrial NV on November 29, 2024 and sell it today you would lose (26.00) from holding CNH Industrial NV or give up 2.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CNH Industrial NV vs. PureTech Health plc
Performance |
| Timeline |
| CNH Industrial NV |
| PureTech Health plc |
CNH Industrial and PureTech Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CNH Industrial and PureTech Health
The main advantage of trading using opposite CNH Industrial and PureTech Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNH Industrial position performs unexpectedly, PureTech Health 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 PureTech Health will offset losses from the drop in PureTech Health's long position.| CNH Industrial vs. Zinc Media Group | CNH Industrial vs. JD Sports Fashion | CNH Industrial vs. G5 Entertainment AB | CNH Industrial vs. Grand Vision Media |
| PureTech Health vs. Delta Air Lines | PureTech Health vs. Wizz Air Holdings | PureTech Health vs. Porvair plc | PureTech Health vs. Naturhouse Health SA |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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