Correlation Between Deere and Aurora Solar

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

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

Diversification Opportunities for Deere and Aurora Solar

-0.59

Correlation Coefficient

Deere  Aurora Solar

Excellent diversification

The 3 months correlation between Deere and Aurora is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Aurora Solar Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Solar 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 Aurora Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Solar Technologies has no effect on the direction of Deere i.e., Deere and Aurora Solar go up and down completely randomly.

Pair Corralation between Deere and Aurora Solar

Allowing for the 90-day total investment horizon Deere Company is expected to generate 0.15 times more return on investment than Aurora Solar. However, Deere Company is 6.48 times less risky than Aurora Solar. It trades about 0.12 of its potential returns per unit of risk. Aurora Solar Technologies is currently generating about 0.01 per unit of risk. If you would invest  39,327  in Deere Company on September 16, 2024 and sell it today you would earn a total of  4,717  from holding Deere Company or generate 11.99% return on investment over 90 days.

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

Deere Company  vs.  Aurora Solar Technologies

Deere Company

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Deere may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aurora Solar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Deere and Aurora Solar

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

The idea behind Deere Company and Aurora Solar Technologies 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..