Correlation Between CNH Industrial and Gaztransport

Can any of the company-specific risk be diversified away by investing in both CNH Industrial and Gaztransport 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 Gaztransport 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 Gaztransport et Technigaz, you can compare the effects of market volatilities on CNH Industrial and Gaztransport 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 Gaztransport. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNH Industrial and Gaztransport.

Diversification Opportunities for CNH Industrial and Gaztransport

0.52

Correlation Coefficient

CNH Industrial  Gaztransport

Very weak diversification

The 3 months correlation between CNH and Gaztransport is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Gaztransport et Technigaz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaztransport et Technigaz 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 Gaztransport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaztransport et Technigaz has no effect on the direction of CNH Industrial i.e., CNH Industrial and Gaztransport go up and down completely randomly.

Pair Corralation between CNH Industrial and Gaztransport

Assuming the 90 days trading horizon CNH Industrial NV is expected to under-perform the Gaztransport. In addition to that, CNH Industrial is 4.51 times more volatile than Gaztransport et Technigaz. It trades about -0.08 of its total potential returns per unit of risk. Gaztransport et Technigaz is currently generating about -0.15 per unit of volatility. If you would invest  13,484  in Gaztransport et Technigaz on September 28, 2024 and sell it today you would lose (564.00) from holding Gaztransport et Technigaz or give up 4.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

CNH Industrial NV  vs.  Gaztransport et Technigaz

CNH Industrial NV

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CNH Industrial NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CNH Industrial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Gaztransport et Technigaz

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport et Technigaz are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Gaztransport is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CNH Industrial and Gaztransport

The main advantage of trading using opposite CNH Industrial and Gaztransport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNH Industrial position performs unexpectedly, Gaztransport 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 Gaztransport will offset losses from the drop in Gaztransport's long position.

The idea behind CNH Industrial NV and Gaztransport et Technigaz pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.