Correlation Between Deere and Columbus McKinnon

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

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

Diversification Opportunities for Deere and Columbus McKinnon

-0.25

Correlation Coefficient

Deere  Columbus McKinnon

Very good diversification

The 3 months correlation between Deere and Columbus is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Columbus McKinnon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbus McKinnon 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 Columbus McKinnon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbus McKinnon has no effect on the direction of Deere i.e., Deere and Columbus McKinnon go up and down completely randomly.

Pair Corralation between Deere and Columbus McKinnon

Allowing for the 90-day total investment horizon Deere Company is expected to generate 0.33 times more return on investment than Columbus McKinnon. However, Deere Company is 3.03 times less risky than Columbus McKinnon. It trades about 0.17 of its potential returns per unit of risk. Columbus McKinnon is currently generating about -0.13 per unit of risk. If you would invest  39,856  in Deere Company on November 19, 2024 and sell it today you would earn a total of  8,166  from holding Deere Company or generate 20.49% return on investment over 90 days.

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

Deere Company  vs.  Columbus McKinnon

Deere Company

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Deere exhibited solid returns over the last few months and may actually be approaching a breakup point.

Columbus McKinnon

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbus McKinnon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Deere and Columbus McKinnon

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

The idea behind Deere Company and Columbus McKinnon 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.