Correlation Between London Security and CNH Industrial
Can any of the company-specific risk be diversified away by investing in both London Security 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 London Security and CNH Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between London Security Plc and CNH Industrial NV, you can compare the effects of market volatilities on London Security 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 London Security with a short position of CNH Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and CNH Industrial.
Diversification Opportunities for London Security and CNH Industrial
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between London and CNH is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc 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 London Security 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 London Security Plc 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 London Security i.e., London Security and CNH Industrial go up and down completely randomly.
Pair Corralation between London Security and CNH Industrial
Assuming the 90 days trading horizon London Security Plc is expected to generate 0.18 times more return on investment than CNH Industrial. However, London Security Plc is 5.48 times less risky than CNH Industrial. It trades about 0.22 of its potential returns per unit of risk. CNH Industrial NV is currently generating about -0.08 per unit of risk. If you would invest 325,000 in London Security Plc on September 24, 2024 and sell it today you would earn a total of 15,000 from holding London Security Plc or generate 4.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
London Security Plc vs. CNH Industrial NV
Performance |
| Timeline |
| London Security Plc |
| CNH Industrial NV |
London Security and CNH Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and CNH Industrial
The main advantage of trading using opposite London Security and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security 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.| London Security vs. Samsung Electronics Co | London Security vs. Samsung Electronics Co | London Security vs. Hyundai Motor | London Security vs. Toyota Motor Corp |
| CNH Industrial vs. Uniper SE | CNH Industrial vs. Mulberry Group PLC | CNH Industrial vs. London Security Plc | CNH Industrial vs. Triad Group 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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