Correlation Between Deere and Daimler Truck

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

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

Diversification Opportunities for Deere and Daimler Truck

-0.14

Correlation Coefficient

Deere  Daimler Truck

Good diversification

The 3 months correlation between Deere and Daimler is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Daimler Truck Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daimler Truck Holding 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 Daimler Truck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daimler Truck Holding has no effect on the direction of Deere i.e., Deere and Daimler Truck go up and down completely randomly.

Pair Corralation between Deere and Daimler Truck

Allowing for the 90-day total investment horizon Deere Company is expected to generate 1.04 times more return on investment than Daimler Truck. However, Deere is 1.04 times more volatile than Daimler Truck Holding. It trades about 0.21 of its potential returns per unit of risk. Daimler Truck Holding is currently generating about 0.01 per unit of risk. If you would invest  40,453  in Deere Company on September 18, 2024 and sell it today you would earn a total of  3,906  from holding Deere Company or generate 9.66% 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.  Daimler Truck Holding

Deere Company

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 8 (%) 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.

Daimler Truck Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Daimler Truck Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Daimler Truck may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Deere and Daimler Truck

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

The idea behind Deere Company and Daimler Truck Holding 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.