Correlation Between CNH Industrial and Dow Jones
Can any of the company-specific risk be diversified away by investing in both CNH Industrial and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on CNH Industrial and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNH Industrial and Dow Jones.
Diversification Opportunities for CNH Industrial and Dow Jones
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CNH and Dow is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of CNH Industrial i.e., CNH Industrial and Dow Jones go up and down completely randomly.
Pair Corralation between CNH Industrial and Dow Jones
Assuming the 90 days trading horizon CNH Industrial NV is expected to generate 2.66 times more return on investment than Dow Jones. However, CNH Industrial is 2.66 times more volatile than Dow Jones Industrial. It trades about 0.27 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.38 per unit of risk. If you would invest 1,040 in CNH Industrial NV on September 3, 2024 and sell it today you would earn a total of 152.00 from holding CNH Industrial NV or generate 14.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
CNH Industrial NV vs. Dow Jones Industrial
Performance |
| Timeline |
CNH Industrial and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
CNH Industrial NV
Pair trading matchups for CNH Industrial
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with CNH Industrial and Dow Jones
The main advantage of trading using opposite CNH Industrial and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNH Industrial position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| CNH Industrial vs. Zijin Mining Group | CNH Industrial vs. MCEWEN MINING INC | CNH Industrial vs. GUARDANT HEALTH CL | CNH Industrial vs. Jacquet Metal Service |
| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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