Correlation Between Induction Healthcare and CNH Industrial
Can any of the company-specific risk be diversified away by investing in both Induction Healthcare 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 Induction Healthcare and CNH Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Induction Healthcare Group and CNH Industrial NV, you can compare the effects of market volatilities on Induction Healthcare 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 Induction Healthcare with a short position of CNH Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Induction Healthcare and CNH Industrial.
Diversification Opportunities for Induction Healthcare and CNH Industrial
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Induction and CNH is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Induction Healthcare Group 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 Induction Healthcare 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 Induction Healthcare Group 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 Induction Healthcare i.e., Induction Healthcare and CNH Industrial go up and down completely randomly.
Pair Corralation between Induction Healthcare and CNH Industrial
Assuming the 90 days trading horizon Induction Healthcare Group is expected to generate 1.89 times more return on investment than CNH Industrial. However, Induction Healthcare is 1.89 times more volatile than CNH Industrial NV. It trades about 0.21 of its potential returns per unit of risk. CNH Industrial NV is currently generating about 0.23 per unit of risk. If you would invest 750.00 in Induction Healthcare Group on August 30, 2024 and sell it today you would earn a total of 150.00 from holding Induction Healthcare Group or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Induction Healthcare Group vs. CNH Industrial NV
Performance |
| Timeline |
| Induction Healthcare |
| CNH Industrial NV |
Induction Healthcare and CNH Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Induction Healthcare and CNH Industrial
The main advantage of trading using opposite Induction Healthcare and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Induction Healthcare 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.| Induction Healthcare vs. Toyota Motor Corp | Induction Healthcare vs. SoftBank Group Corp | Induction Healthcare vs. OTP Bank Nyrt | Induction Healthcare vs. Las Vegas Sands |
| CNH Industrial vs. Tungsten West PLC | CNH Industrial vs. Argo Group Limited | CNH Industrial vs. Hardide PLC | CNH Industrial vs. Versarien PLC |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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