Correlation Between Voestalpine and CNH Industrial

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

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

Diversification Opportunities for Voestalpine and CNH Industrial

-0.61

Correlation Coefficient

Voestalpine  CNH Industrial

Excellent diversification

The 3 months correlation between Voestalpine and CNH is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Voestalpine 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 Voestalpine 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 Voestalpine 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 Voestalpine i.e., Voestalpine and CNH Industrial go up and down completely randomly.

Pair Corralation between Voestalpine and CNH Industrial

Assuming the 90 days trading horizon Voestalpine AG is expected to generate 0.86 times more return on investment than CNH Industrial. However, Voestalpine AG is 1.17 times less risky than CNH Industrial. It trades about -0.01 of its potential returns per unit of risk. CNH Industrial NV is currently generating about -0.02 per unit of risk. If you would invest  2,318  in Voestalpine AG on September 14, 2024 and sell it today you would lose (398.00) from holding Voestalpine AG or give up 17.17% of portfolio value over 90 days.

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

Voestalpine AG  vs.  CNH Industrial NV

Voestalpine AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voestalpine AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Voestalpine 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 Voestalpine and CNH Industrial

The main advantage of trading using opposite Voestalpine and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Voestalpine 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 Voestalpine 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..