Correlation Between North American and Commercial Vehicle
Can any of the company-specific risk be diversified away by investing in both North American and Commercial Vehicle 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 North American and Commercial Vehicle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and Commercial Vehicle Group, you can compare the effects of market volatilities on North American and Commercial Vehicle 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 North American with a short position of Commercial Vehicle. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Commercial Vehicle.
Diversification Opportunities for North American and Commercial Vehicle
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between North and Commercial is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Commercial Vehicle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial Vehicle and North American 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 North American Construction are associated (or correlated) with Commercial Vehicle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial Vehicle has no effect on the direction of North American i.e., North American and Commercial Vehicle go up and down completely randomly.
Pair Corralation between North American and Commercial Vehicle
Assuming the 90 days horizon North American Construction is expected to generate 0.29 times more return on investment than Commercial Vehicle. However, North American Construction is 3.43 times less risky than Commercial Vehicle. It trades about -0.44 of its potential returns per unit of risk. Commercial Vehicle Group is currently generating about -0.15 per unit of risk. If you would invest 1,930 in North American Construction on November 28, 2024 and sell it today you would lose (210.00) from holding North American Construction or give up 10.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. Commercial Vehicle Group
Performance |
| Timeline |
| North American Const |
| Commercial Vehicle |
North American and Commercial Vehicle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Commercial Vehicle
The main advantage of trading using opposite North American and Commercial Vehicle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, Commercial Vehicle 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 Commercial Vehicle will offset losses from the drop in Commercial Vehicle's long position.| North American vs. CNVISION MEDIA | North American vs. SQUIRREL MEDIA SA | North American vs. Nippon Light Metal | North American vs. LG Display Co |
| Commercial Vehicle vs. Sunny Optical Technology | Commercial Vehicle vs. Alfa Financial Software | Commercial Vehicle vs. Check Point Software | Commercial Vehicle vs. Casio Computer CoLtd |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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