Correlation Between Apple and CNH Industrial
Can any of the company-specific risk be diversified away by investing in both Apple and CNH Industrial 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 Apple and CNH Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and CNH Industrial NV, you can compare the effects of market volatilities on Apple and CNH Industrial 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 Apple with a short position of CNH Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and CNH Industrial.
Diversification Opportunities for Apple and CNH Industrial
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Apple and CNH is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and CNH Industrial NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNH Industrial NV and Apple 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 Apple Inc are associated (or correlated) with CNH Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNH Industrial NV has no effect on the direction of Apple i.e., Apple and CNH Industrial go up and down completely randomly.
Pair Corralation between Apple and CNH Industrial
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.68 times more return on investment than CNH Industrial. However, Apple Inc is 1.47 times less risky than CNH Industrial. It trades about 0.15 of its potential returns per unit of risk. CNH Industrial NV is currently generating about 0.03 per unit of risk. If you would invest 15,467 in Apple Inc on September 3, 2024 and sell it today you would earn a total of 6,968 from holding Apple Inc or generate 45.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. CNH Industrial NV
Performance |
| Timeline |
| Apple Inc |
| CNH Industrial NV |
Apple and CNH Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and CNH Industrial
The main advantage of trading using opposite Apple and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, CNH Industrial 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 CNH Industrial will offset losses from the drop in CNH Industrial's long position.| Apple vs. Chongqing Machinery Electric | Apple vs. ePlay Digital | Apple vs. PLAY2CHILL SA ZY | Apple vs. JD SPORTS FASH |
| CNH Industrial vs. MAGNUM MINING EXP | CNH Industrial vs. Calibre Mining Corp | CNH Industrial vs. PARKEN Sport Entertainment | CNH Industrial vs. GALENA MINING LTD |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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