Correlation Between CNH Industrial and Erste Group
Can any of the company-specific risk be diversified away by investing in both CNH Industrial and Erste Group 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 Erste Group 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 Erste Group Bank, you can compare the effects of market volatilities on CNH Industrial and Erste Group 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 Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNH Industrial and Erste Group.
Diversification Opportunities for CNH Industrial and Erste Group
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CNH and Erste is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank 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 Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of CNH Industrial i.e., CNH Industrial and Erste Group go up and down completely randomly.
Pair Corralation between CNH Industrial and Erste Group
Assuming the 90 days trading horizon CNH Industrial NV is expected to generate 1.63 times more return on investment than Erste Group. However, CNH Industrial is 1.63 times more volatile than Erste Group Bank. It trades about 0.09 of its potential returns per unit of risk. Erste Group Bank is currently generating about 0.12 per unit of risk. If you would invest 1,017 in CNH Industrial NV on August 23, 2024 and sell it today you would earn a total of 50.00 from holding CNH Industrial NV or generate 4.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CNH Industrial NV vs. Erste Group Bank
Performance |
| Timeline |
| CNH Industrial NV |
| Erste Group Bank |
CNH Industrial and Erste Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CNH Industrial and Erste Group
The main advantage of trading using opposite CNH Industrial and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNH Industrial position performs unexpectedly, Erste Group 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 Erste Group will offset losses from the drop in Erste Group's long position.| CNH Industrial vs. Erste Group Bank | CNH Industrial vs. SBM Offshore NV | CNH Industrial vs. Vienna Insurance Group | CNH Industrial vs. UNIQA Insurance Group |
| Erste Group vs. Raiffeisen Bank International | Erste Group vs. OMV Aktiengesellschaft | Erste Group vs. Voestalpine AG | Erste Group vs. Vienna Insurance Group |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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