Correlation Between CNH Industrial and Komatsu
Can any of the company-specific risk be diversified away by investing in both CNH Industrial and Komatsu 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 Komatsu 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 Komatsu, you can compare the effects of market volatilities on CNH Industrial and Komatsu 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 Komatsu. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNH Industrial and Komatsu.
Diversification Opportunities for CNH Industrial and Komatsu
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CNH and Komatsu is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Komatsu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Komatsu 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 Komatsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Komatsu has no effect on the direction of CNH Industrial i.e., CNH Industrial and Komatsu go up and down completely randomly.
Pair Corralation between CNH Industrial and Komatsu
Assuming the 90 days horizon CNH Industrial NV is expected to generate 1.71 times more return on investment than Komatsu. However, CNH Industrial is 1.71 times more volatile than Komatsu. It trades about 0.19 of its potential returns per unit of risk. Komatsu is currently generating about 0.11 per unit of risk. If you would invest 1,034 in CNH Industrial NV on September 3, 2024 and sell it today you would earn a total of 156.00 from holding CNH Industrial NV or generate 15.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CNH Industrial NV vs. Komatsu
Performance |
| Timeline |
| CNH Industrial NV |
| Komatsu |
CNH Industrial and Komatsu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CNH Industrial and Komatsu
The main advantage of trading using opposite CNH Industrial and Komatsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNH Industrial position performs unexpectedly, Komatsu 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 Komatsu will offset losses from the drop in Komatsu's long position.| CNH Industrial vs. SERI INDUSTRIAL EO | CNH Industrial vs. MAROC TELECOM | CNH Industrial vs. SK TELECOM TDADR | CNH Industrial vs. Ribbon Communications |
| Komatsu vs. Transportadora de Gas | Komatsu vs. Air Transport Services | Komatsu vs. RYU Apparel | Komatsu vs. NTG Nordic Transport |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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