Correlation Between CNH Industrial and ACS Actividades

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

Diversification Opportunities for CNH Industrial and ACS Actividades

0.67

Correlation Coefficient

CNH Industrial  ACS Actividades

Poor diversification

The 3 months correlation between CNH and ACS is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and ACS Actividades de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACS Actividades de 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 ACS Actividades. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACS Actividades de has no effect on the direction of CNH Industrial i.e., CNH Industrial and ACS Actividades go up and down completely randomly.

Pair Corralation between CNH Industrial and ACS Actividades

Assuming the 90 days trading horizon CNH Industrial NV is expected to generate 1.99 times more return on investment than ACS Actividades. However, CNH Industrial is 1.99 times more volatile than ACS Actividades de. It trades about 0.13 of its potential returns per unit of risk. ACS Actividades de is currently generating about 0.2 per unit of risk. If you would invest  938.00  in CNH Industrial NV on September 17, 2024 and sell it today you would earn a total of  188.00  from holding CNH Industrial NV or generate 20.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

CNH Industrial NV  vs.  ACS Actividades de

CNH Industrial NV

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CNH Industrial NV are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, CNH Industrial demonstrated solid returns over the last few months and may actually be approaching a breakup point.

ACS Actividades de

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ACS Actividades de are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, ACS Actividades demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CNH Industrial and ACS Actividades

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

The idea behind CNH Industrial NV and ACS Actividades de 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.