Correlation Between CNH Industrial and Wolford Aktiengesellscha

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

Diversification Opportunities for CNH Industrial and Wolford Aktiengesellscha

0.04

Correlation Coefficient

CNH Industrial  Wolford Aktiengesellscha

Significant diversification

The 3 months correlation between CNH and Wolford is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Wolford Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolford 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 Wolford Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wolford Aktiengesellscha has no effect on the direction of CNH Industrial i.e., CNH Industrial and Wolford Aktiengesellscha go up and down completely randomly.

Pair Corralation between CNH Industrial and Wolford Aktiengesellscha

Assuming the 90 days trading horizon CNH Industrial is expected to generate 2.17 times less return on investment than Wolford Aktiengesellscha. But when comparing it to its historical volatility, CNH Industrial NV is 2.67 times less risky than Wolford Aktiengesellscha. It trades about 0.15 of its potential returns per unit of risk. Wolford Aktiengesellschaft is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  312.00  in Wolford Aktiengesellschaft on September 15, 2024 and sell it today you would earn a total of  136.00  from holding Wolford Aktiengesellschaft or generate 43.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

CNH Industrial NV  vs.  Wolford 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.

Wolford Aktiengesellscha

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wolford Aktiengesellschaft are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent essential indicators, Wolford Aktiengesellscha demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CNH Industrial and Wolford Aktiengesellscha

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

The idea behind CNH Industrial NV and Wolford 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.