Correlation Between Chemours and CNH Industrial
Can any of the company-specific risk be diversified away by investing in both Chemours 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 Chemours and CNH Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chemours Co and CNH Industrial NV, you can compare the effects of market volatilities on Chemours 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 Chemours with a short position of CNH Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chemours and CNH Industrial.
Diversification Opportunities for Chemours and CNH Industrial
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chemours and CNH is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Chemours Co 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 Chemours 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 Chemours Co 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 Chemours i.e., Chemours and CNH Industrial go up and down completely randomly.
Pair Corralation between Chemours and CNH Industrial
Allowing for the 90-day total investment horizon Chemours Co is expected to under-perform the CNH Industrial. In addition to that, Chemours is 1.5 times more volatile than CNH Industrial NV. It trades about -0.1 of its total potential returns per unit of risk. CNH Industrial NV is currently generating about -0.04 per unit of volatility. If you would invest 1,140 in CNH Industrial NV on September 21, 2024 and sell it today you would lose (26.00) from holding CNH Industrial NV or give up 2.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chemours Co vs. CNH Industrial NV
Performance |
| Timeline |
| Chemours |
| CNH Industrial NV |
Chemours and CNH Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chemours and CNH Industrial
The main advantage of trading using opposite Chemours and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chemours 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.| Chemours vs. Olin Corporation | Chemours vs. Cabot | Chemours vs. Kronos Worldwide | Chemours vs. LyondellBasell Industries NV |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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