Correlation Between CEA Industries and CNH Industrial
Can any of the company-specific risk be diversified away by investing in both CEA Industries 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 CEA Industries and CNH Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CEA Industries Warrant and CNH Industrial NV, you can compare the effects of market volatilities on CEA Industries 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 CEA Industries with a short position of CNH Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEA Industries and CNH Industrial.
Diversification Opportunities for CEA Industries and CNH Industrial
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between CEA and CNH is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding CEA Industries Warrant 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 CEA Industries 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 CEA Industries Warrant 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 CEA Industries i.e., CEA Industries and CNH Industrial go up and down completely randomly.
Pair Corralation between CEA Industries and CNH Industrial
Assuming the 90 days horizon CEA Industries Warrant is expected to generate 34.83 times more return on investment than CNH Industrial. However, CEA Industries is 34.83 times more volatile than CNH Industrial NV. It trades about 0.14 of its potential returns per unit of risk. CNH Industrial NV is currently generating about 0.43 per unit of risk. If you would invest 1.27 in CEA Industries Warrant on October 20, 2024 and sell it today you would lose (0.28) from holding CEA Industries Warrant or give up 22.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
CEA Industries Warrant vs. CNH Industrial NV
Performance |
| Timeline |
| CEA Industries Warrant |
| CNH Industrial NV |
CEA Industries and CNH Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CEA Industries and CNH Industrial
The main advantage of trading using opposite CEA Industries and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CEA Industries 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.| CEA Industries vs. CEA Industries | CEA Industries vs. Thayer Ventures Acquisition | CEA Industries vs. Iveda Solutions Warrant |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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