Correlation Between CNH Industrial and Wolford Aktiengesellscha
Can any of the company-specific risk be diversified away by investing in both CNH Industrial and Wolford Aktiengesellscha 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 Wolford Aktiengesellscha 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 Wolford Aktiengesellschaft, you can compare the effects of market volatilities on CNH Industrial and Wolford Aktiengesellscha 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 Wolford Aktiengesellscha. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNH Industrial and Wolford Aktiengesellscha.
Diversification Opportunities for CNH Industrial and Wolford Aktiengesellscha
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between CNH and Wolford is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Wolford Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolford Aktiengesellscha 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 Wolford Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wolford Aktiengesellscha has no effect on the direction of CNH Industrial i.e., CNH Industrial and Wolford Aktiengesellscha go up and down completely randomly.
Pair Corralation between CNH Industrial and Wolford Aktiengesellscha
Assuming the 90 days trading horizon CNH Industrial is expected to generate 8.94 times less return on investment than Wolford Aktiengesellscha. But when comparing it to its historical volatility, CNH Industrial NV is 4.19 times less risky than Wolford Aktiengesellscha. It trades about 0.16 of its potential returns per unit of risk. Wolford Aktiengesellschaft is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 250.00 in Wolford Aktiengesellschaft on September 18, 2024 and sell it today you would earn a total of 194.00 from holding Wolford Aktiengesellschaft or generate 77.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CNH Industrial NV vs. Wolford Aktiengesellschaft
Performance |
| Timeline |
| CNH Industrial NV |
| Wolford Aktiengesellscha |
CNH Industrial and Wolford Aktiengesellscha Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CNH Industrial and Wolford Aktiengesellscha
The main advantage of trading using opposite CNH Industrial and Wolford Aktiengesellscha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNH Industrial position performs unexpectedly, Wolford Aktiengesellscha 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 Wolford Aktiengesellscha will offset losses from the drop in Wolford Aktiengesellscha's long position.| CNH Industrial vs. RATH Aktiengesellschaft | CNH Industrial vs. AT S Austria | CNH Industrial vs. BAWAG Group AG | CNH Industrial vs. Semperit Aktiengesellschaft Holding |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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