Correlation Between Deere and Environment

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

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

Diversification Opportunities for Deere and Environment

-0.15

Correlation Coefficient

Deere  Environment

Good diversification

The 3 months correlation between Deere and Environment is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Environment And Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Environment And Alte 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 Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Environment And Alte has no effect on the direction of Deere i.e., Deere and Environment go up and down completely randomly.

Pair Corralation between Deere and Environment

Allowing for the 90-day total investment horizon Deere Company is expected to generate 1.35 times more return on investment than Environment. However, Deere is 1.35 times more volatile than Environment And Alternative. It trades about 0.06 of its potential returns per unit of risk. Environment And Alternative is currently generating about -0.1 per unit of risk. If you would invest  45,750  in Deere Company on December 3, 2024 and sell it today you would earn a total of  2,329  from holding Deere Company or generate 5.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Deere Company  vs.  Environment And Alternative

Deere Company

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Deere is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Environment And Alte

Risk-Adjusted Performance

Very Weak

Over the last 90 days Environment And Alternative has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Deere and Environment

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

The idea behind Deere Company and Environment And Alternative 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.