Correlation Between VERBUND AG and CNH Industrial

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

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

Diversification Opportunities for VERBUND AG and CNH Industrial

0.14

Correlation Coefficient

VERBUND AG  CNH Industrial

Average diversification

The 3 months correlation between VERBUND and CNH is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding VERBUND 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 VERBUND AG 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 VERBUND 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 VERBUND AG i.e., VERBUND AG and CNH Industrial go up and down completely randomly.

Pair Corralation between VERBUND AG and CNH Industrial

Assuming the 90 days trading horizon VERBUND AG is expected to under-perform the CNH Industrial. But the stock apears to be less risky and, when comparing its historical volatility, VERBUND AG is 1.41 times less risky than CNH Industrial. The stock trades about -0.03 of its potential returns per unit of risk. The CNH Industrial NV is currently generating about 0.14 of returns per unit of risk over similar time horizon. 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 Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

VERBUND AG  vs.  CNH Industrial NV

VERBUND AG

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with VERBUND AG and CNH Industrial

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

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..