Correlation Between Telekom Austria and CNH Industrial

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

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

Diversification Opportunities for Telekom Austria and CNH Industrial

-0.48

Correlation Coefficient

Telekom Austria  CNH Industrial

Very good diversification

The 3 months correlation between Telekom and CNH is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Telekom Austria AG 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 Telekom Austria 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 Telekom Austria AG 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 Telekom Austria i.e., Telekom Austria and CNH Industrial go up and down completely randomly.

Pair Corralation between Telekom Austria and CNH Industrial

Assuming the 90 days trading horizon Telekom Austria AG is expected to under-perform the CNH Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Telekom Austria AG is 1.88 times less risky than CNH Industrial. The stock trades about -0.18 of its potential returns per unit of risk. The CNH Industrial NV is currently generating about 0.07 of returns per unit of risk over similar time horizon. 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	Very Weak
Accuracy	98.41%
Values	Daily Returns

Telekom Austria AG  vs.  CNH Industrial NV

Telekom Austria AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telekom Austria AG 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 basic 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.

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.

Pair Trading with Telekom Austria and CNH Industrial

The main advantage of trading using opposite Telekom Austria and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telekom Austria 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 Telekom Austria AG 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.