Correlation Between CNH Industrial and AGCO
Can any of the company-specific risk be diversified away by investing in both CNH Industrial and AGCO 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 AGCO 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 AGCO Corporation, you can compare the effects of market volatilities on CNH Industrial and AGCO 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 AGCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNH Industrial and AGCO.
Diversification Opportunities for CNH Industrial and AGCO
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CNH and AGCO is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and AGCO Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGCO 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 AGCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGCO has no effect on the direction of CNH Industrial i.e., CNH Industrial and AGCO go up and down completely randomly.
Pair Corralation between CNH Industrial and AGCO
Assuming the 90 days horizon CNH Industrial NV is expected to generate 1.27 times more return on investment than AGCO. However, CNH Industrial is 1.27 times more volatile than AGCO Corporation. It trades about 0.17 of its potential returns per unit of risk. AGCO Corporation is currently generating about 0.07 per unit of risk. If you would invest 1,053 in CNH Industrial NV on August 29, 2024 and sell it today you would earn a total of 145.00 from holding CNH Industrial NV or generate 13.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CNH Industrial NV vs. AGCO Corp.
Performance |
| Timeline |
| CNH Industrial NV |
| AGCO |
CNH Industrial and AGCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CNH Industrial and AGCO
The main advantage of trading using opposite CNH Industrial and AGCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNH Industrial position performs unexpectedly, AGCO 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 AGCO will offset losses from the drop in AGCO's long position.| CNH Industrial vs. Superior Plus Corp | CNH Industrial vs. NMI Holdings | CNH Industrial vs. Origin Agritech | CNH Industrial vs. SIVERS SEMICONDUCTORS AB |
| AGCO vs. Superior Plus Corp | AGCO vs. NMI Holdings | AGCO vs. Origin Agritech | AGCO vs. SIVERS SEMICONDUCTORS AB |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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