Correlation Between CNH Industrial and Kubota
Can any of the company-specific risk be diversified away by investing in both CNH Industrial and Kubota 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 Kubota 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 Kubota, you can compare the effects of market volatilities on CNH Industrial and Kubota 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 Kubota. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNH Industrial and Kubota.
Diversification Opportunities for CNH Industrial and Kubota
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CNH and Kubota is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Kubota in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kubota 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 Kubota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kubota has no effect on the direction of CNH Industrial i.e., CNH Industrial and Kubota go up and down completely randomly.
Pair Corralation between CNH Industrial and Kubota
Assuming the 90 days horizon CNH Industrial NV is expected to generate 1.43 times more return on investment than Kubota. However, CNH Industrial is 1.43 times more volatile than Kubota. It trades about 0.05 of its potential returns per unit of risk. Kubota is currently generating about -0.09 per unit of risk. If you would invest 1,014 in CNH Industrial NV on September 3, 2024 and sell it today you would earn a total of 176.00 from holding CNH Industrial NV or generate 17.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CNH Industrial NV vs. Kubota
Performance |
| Timeline |
| CNH Industrial NV |
| Kubota |
CNH Industrial and Kubota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CNH Industrial and Kubota
The main advantage of trading using opposite CNH Industrial and Kubota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNH Industrial position performs unexpectedly, Kubota 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 Kubota will offset losses from the drop in Kubota'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 |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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