Correlation Between Erste Group and CNH Industrial
Can any of the company-specific risk be diversified away by investing in both Erste Group 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 Erste Group and CNH Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Erste Group Bank and CNH Industrial NV, you can compare the effects of market volatilities on Erste Group 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 Erste Group with a short position of CNH Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and CNH Industrial.
Diversification Opportunities for Erste Group and CNH Industrial
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Erste and CNH is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank 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 Erste Group 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 Erste Group Bank 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 Erste Group i.e., Erste Group and CNH Industrial go up and down completely randomly.
Pair Corralation between Erste Group and CNH Industrial
Assuming the 90 days trading horizon Erste Group is expected to generate 1.26 times less return on investment than CNH Industrial. But when comparing it to its historical volatility, Erste Group Bank is 1.63 times less risky than CNH Industrial. It trades about 0.12 of its potential returns per unit of risk. CNH Industrial NV is currently generating about 0.09 of returns per unit of risk over similar time horizon. 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 |
Erste Group Bank vs. CNH Industrial NV
Performance |
| Timeline |
| Erste Group Bank |
| CNH Industrial NV |
Erste Group and CNH Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erste Group and CNH Industrial
The main advantage of trading using opposite Erste Group and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erste Group 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.| Erste Group vs. Raiffeisen Bank International | Erste Group vs. OMV Aktiengesellschaft | Erste Group vs. Voestalpine AG | Erste Group vs. Vienna Insurance Group |
| CNH Industrial vs. Erste Group Bank | CNH Industrial vs. SBM Offshore NV | CNH Industrial vs. Vienna Insurance Group | CNH Industrial vs. UNIQA 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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