Correlation Between CNH Industrial and Deere
Can any of the company-specific risk be diversified away by investing in both CNH Industrial and Deere 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 Deere 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 Deere Company, you can compare the effects of market volatilities on CNH Industrial and Deere 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 Deere. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNH Industrial and Deere.
Diversification Opportunities for CNH Industrial and Deere
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CNH and Deere is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company 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 Deere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deere Company has no effect on the direction of CNH Industrial i.e., CNH Industrial and Deere go up and down completely randomly.
Pair Corralation between CNH Industrial and Deere
Assuming the 90 days horizon CNH Industrial is expected to generate 1.14 times less return on investment than Deere. In addition to that, CNH Industrial is 1.55 times more volatile than Deere Company. It trades about 0.17 of its total potential returns per unit of risk. Deere Company is currently generating about 0.3 per unit of volatility. If you would invest 37,335 in Deere Company on September 1, 2024 and sell it today you would earn a total of 6,745 from holding Deere Company or generate 18.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
CNH Industrial NV vs. Deere Company
Performance |
| Timeline |
| CNH Industrial NV |
| Deere Company |
CNH Industrial and Deere Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CNH Industrial and Deere
The main advantage of trading using opposite CNH Industrial and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNH Industrial position performs unexpectedly, Deere 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 Deere will offset losses from the drop in Deere's long position.| CNH Industrial vs. EAT WELL INVESTMENT | CNH Industrial vs. NAKED WINES PLC | CNH Industrial vs. SEI INVESTMENTS | CNH Industrial vs. GEAR4MUSIC LS 10 |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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