Correlation Between CNH Industrial and AGCO

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

Diversification Opportunities for CNH Industrial and AGCO

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between CNH and AGCO is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and AGCO Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGCO 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 AGCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGCO has no effect on the direction of CNH Industrial i.e., CNH Industrial and AGCO go up and down completely randomly.

Pair Corralation between CNH Industrial and AGCO

Given the investment horizon of 90 days CNH Industrial NV is expected to under-perform the AGCO. In addition to that, CNH Industrial is 1.11 times more volatile than AGCO Corporation. It trades about -0.01 of its total potential returns per unit of risk. AGCO Corporation is currently generating about 0.01 per unit of volatility. If you would invest  12,027  in AGCO Corporation on December 30, 2023 and sell it today you would earn a total of  275.00  from holding AGCO Corporation or generate 2.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

CNH Industrial NV  vs.  AGCO Corp.

 Performance 
       Timeline  
CNH Industrial NV 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
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 weak technical indicators, CNH Industrial may actually be approaching a critical reversion point that can send shares even higher in April 2024.
AGCO 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in AGCO Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, AGCO is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

CNH Industrial and AGCO Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CNH Industrial and AGCO

The main advantage of trading using opposite CNH Industrial and AGCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNH Industrial position performs unexpectedly, AGCO 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 AGCO will offset losses from the drop in AGCO's long position.
The idea behind CNH Industrial NV and AGCO Corporation 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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