Correlation Between CNH Industrial and Este Lauder

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

Diversification Opportunities for CNH Industrial and Este Lauder

-0.27

Correlation Coefficient

CNH Industrial  Este Lauder

Very good diversification

The 3 months correlation between CNH and Este is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and The Este Lauder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Este Lauder 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 Este Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Este Lauder has no effect on the direction of CNH Industrial i.e., CNH Industrial and Este Lauder go up and down completely randomly.

Pair Corralation between CNH Industrial and Este Lauder

Assuming the 90 days trading horizon CNH Industrial NV is expected to generate 0.62 times more return on investment than Este Lauder. However, CNH Industrial NV is 1.62 times less risky than Este Lauder. It trades about 0.07 of its potential returns per unit of risk. The Este Lauder is currently generating about -0.09 per unit of risk. If you would invest  996.00  in CNH Industrial NV on September 29, 2024 and sell it today you would earn a total of  86.00  from holding CNH Industrial NV or generate 8.63% return on investment over 90 days.

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

CNH Industrial NV  vs.  The Este Lauder

CNH Industrial NV

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CNH Industrial NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, CNH Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Este Lauder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Este Lauder has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with CNH Industrial and Este Lauder

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

The idea behind CNH Industrial NV and The Este Lauder 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.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..