Correlation Between Deere and Digilife Technologies

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

By analyzing existing cross correlation between Deere Company and Digilife Technologies Limited, you can compare the effects of market volatilities on Deere and Digilife Technologies 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 Deere with a short position of Digilife Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deere and Digilife Technologies.

Diversification Opportunities for Deere and Digilife Technologies

-0.47

Correlation Coefficient

Deere  Digilife Technologies

Very good diversification

The 3 months correlation between Deere and Digilife is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Digilife Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digilife Technologies and Deere 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 Deere Company are associated (or correlated) with Digilife Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digilife Technologies has no effect on the direction of Deere i.e., Deere and Digilife Technologies go up and down completely randomly.

Pair Corralation between Deere and Digilife Technologies

Assuming the 90 days horizon Deere Company is expected to under-perform the Digilife Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Deere Company is 2.23 times less risky than Digilife Technologies. The stock trades about -0.45 of its potential returns per unit of risk. The Digilife Technologies Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  76.00  in Digilife Technologies Limited on October 11, 2024 and sell it today you would lose (1.00) from holding Digilife Technologies Limited or give up 1.32% of portfolio value over 90 days.

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

Deere Company  vs.  Digilife Technologies Limited

Deere Company

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Deere may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Digilife Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digilife Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Digilife Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Deere and Digilife Technologies

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

The idea behind Deere Company and Digilife Technologies Limited 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.