Correlation Between CNH Industrial and Terex
Can any of the company-specific risk be diversified away by investing in both CNH Industrial and Terex 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 Terex 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 Terex, you can compare the effects of market volatilities on CNH Industrial and Terex 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 Terex. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNH Industrial and Terex.
Diversification Opportunities for CNH Industrial and Terex
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between CNH and Terex is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Terex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terex 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 Terex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terex has no effect on the direction of CNH Industrial i.e., CNH Industrial and Terex go up and down completely randomly.
Pair Corralation between CNH Industrial and Terex
Assuming the 90 days horizon CNH Industrial NV is expected to generate 1.74 times more return on investment than Terex. However, CNH Industrial is 1.74 times more volatile than Terex. It trades about 0.23 of its potential returns per unit of risk. Terex is currently generating about 0.16 per unit of risk. If you would invest 1,100 in CNH Industrial NV on November 2, 2024 and sell it today you would earn a total of 137.00 from holding CNH Industrial NV or generate 12.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CNH Industrial NV vs. Terex
Performance |
| Timeline |
| CNH Industrial NV |
| Terex |
CNH Industrial and Terex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CNH Industrial and Terex
The main advantage of trading using opposite CNH Industrial and Terex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNH Industrial position performs unexpectedly, Terex 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 Terex will offset losses from the drop in Terex's long position.| CNH Industrial vs. Deere Company | CNH Industrial vs. Komatsu | CNH Industrial vs. Kubota | CNH Industrial vs. KUBOTA P ADR20 |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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