Correlation Between CNH Industrial and PACCAR

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

Diversification Opportunities for CNH Industrial and PACCAR

0.74

Correlation Coefficient

CNH Industrial  PACCAR

Poor diversification

The 3 months correlation between CNH and PACCAR is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of CNH Industrial i.e., CNH Industrial and PACCAR go up and down completely randomly.

Pair Corralation between CNH Industrial and PACCAR

Considering the 90-day investment horizon CNH Industrial is expected to generate 2.71 times less return on investment than PACCAR. In addition to that, CNH Industrial is 1.07 times more volatile than PACCAR Inc. It trades about 0.03 of its total potential returns per unit of risk. PACCAR Inc is currently generating about 0.08 per unit of volatility. If you would invest  8,914  in PACCAR Inc on May 4, 2025 and sell it today you would earn a total of  734.00  from holding PACCAR Inc or generate 8.23% return on investment over 90 days.

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

CNH Industrial NV  vs.  PACCAR Inc

CNH Industrial NV

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CNH Industrial NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, CNH Industrial is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

PACCAR Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, PACCAR may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with CNH Industrial and PACCAR

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

The idea behind CNH Industrial NV and PACCAR Inc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.