Correlation Between CNH Industrial and Lenzing Aktiengesellscha

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

Diversification Opportunities for CNH Industrial and Lenzing Aktiengesellscha

-0.46

Correlation Coefficient

CNH Industrial  Lenzing Aktiengesellscha

Very good diversification

The 3 months correlation between CNH and Lenzing is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Lenzing Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lenzing Aktiengesellscha 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 Lenzing Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lenzing Aktiengesellscha has no effect on the direction of CNH Industrial i.e., CNH Industrial and Lenzing Aktiengesellscha go up and down completely randomly.

Pair Corralation between CNH Industrial and Lenzing Aktiengesellscha

Assuming the 90 days trading horizon CNH Industrial NV is expected to generate 1.16 times more return on investment than Lenzing Aktiengesellscha. However, CNH Industrial is 1.16 times more volatile than Lenzing Aktiengesellschaft. It trades about 0.14 of its potential returns per unit of risk. Lenzing Aktiengesellschaft is currently generating about 0.01 per unit of risk. If you would invest  922.00  in CNH Industrial NV on September 14, 2024 and sell it today you would earn a total of  199.00  from holding CNH Industrial NV or generate 21.58% return on investment over 90 days.

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

CNH Industrial NV  vs.  Lenzing Aktiengesellschaft

CNH Industrial NV

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CNH Industrial NV are ranked lower than 11 (%) 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.

Lenzing Aktiengesellscha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lenzing Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Lenzing Aktiengesellscha is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with CNH Industrial and Lenzing Aktiengesellscha

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

The idea behind CNH Industrial NV and Lenzing Aktiengesellschaft 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.