Correlation Between CNH Industrial and METHODE ELECTRONICS
Can any of the company-specific risk be diversified away by investing in both CNH Industrial and METHODE ELECTRONICS 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 METHODE ELECTRONICS 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 METHODE ELECTRONICS, you can compare the effects of market volatilities on CNH Industrial and METHODE ELECTRONICS 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 METHODE ELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNH Industrial and METHODE ELECTRONICS.
Diversification Opportunities for CNH Industrial and METHODE ELECTRONICS
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CNH and METHODE is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and METHODE ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METHODE ELECTRONICS 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 METHODE ELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of METHODE ELECTRONICS has no effect on the direction of CNH Industrial i.e., CNH Industrial and METHODE ELECTRONICS go up and down completely randomly.
Pair Corralation between CNH Industrial and METHODE ELECTRONICS
Assuming the 90 days trading horizon CNH Industrial NV is expected to generate 0.45 times more return on investment than METHODE ELECTRONICS. However, CNH Industrial NV is 2.22 times less risky than METHODE ELECTRONICS. It trades about 0.0 of its potential returns per unit of risk. METHODE ELECTRONICS is currently generating about -0.03 per unit of risk. If you would invest 1,309 in CNH Industrial NV on September 12, 2024 and sell it today you would lose (136.00) from holding CNH Industrial NV or give up 10.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
CNH Industrial NV vs. METHODE ELECTRONICS
Performance |
| Timeline |
| CNH Industrial NV |
| METHODE ELECTRONICS |
CNH Industrial and METHODE ELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CNH Industrial and METHODE ELECTRONICS
The main advantage of trading using opposite CNH Industrial and METHODE ELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNH Industrial position performs unexpectedly, METHODE ELECTRONICS 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 METHODE ELECTRONICS will offset losses from the drop in METHODE ELECTRONICS's long position.| CNH Industrial vs. METHODE ELECTRONICS | CNH Industrial vs. SLR Investment Corp | CNH Industrial vs. WisdomTree Investments | CNH Industrial vs. Electronic Arts |
| METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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