Correlation Between Empire Metals and CNH Industrial

Can any of the company-specific risk be diversified away by investing in both Empire Metals and CNH Industrial 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 Empire Metals and CNH Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Empire Metals Limited and CNH Industrial NV, you can compare the effects of market volatilities on Empire Metals and CNH Industrial 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 Empire Metals with a short position of CNH Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Metals and CNH Industrial.

Diversification Opportunities for Empire Metals and CNH Industrial

-0.45

Correlation Coefficient

Empire Metals  CNH Industrial

Very good diversification

The 3 months correlation between Empire and CNH is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Empire Metals Limited and CNH Industrial NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNH Industrial NV and Empire Metals 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 Empire Metals Limited are associated (or correlated) with CNH Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNH Industrial NV has no effect on the direction of Empire Metals i.e., Empire Metals and CNH Industrial go up and down completely randomly.

Pair Corralation between Empire Metals and CNH Industrial

Assuming the 90 days trading horizon Empire Metals Limited is expected to generate 2.03 times more return on investment than CNH Industrial. However, Empire Metals is 2.03 times more volatile than CNH Industrial NV. It trades about 0.07 of its potential returns per unit of risk. CNH Industrial NV is currently generating about -0.01 per unit of risk. If you would invest  165.00  in Empire Metals Limited on September 20, 2024 and sell it today you would earn a total of  460.00  from holding Empire Metals Limited or generate 278.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.39%
Values	Daily Returns

Empire Metals Limited  vs.  CNH Industrial NV

Empire Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empire Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Empire Metals and CNH Industrial

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

The idea behind Empire Metals Limited and CNH Industrial NV 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.