Correlation Between Deere and Gencor Industries

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

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

Diversification Opportunities for Deere and Gencor Industries

0.19

Correlation Coefficient

Deere  Gencor Industries

Average diversification

The 3 months correlation between Deere and Gencor is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Gencor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gencor Industries 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 Gencor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gencor Industries has no effect on the direction of Deere i.e., Deere and Gencor Industries go up and down completely randomly.

Pair Corralation between Deere and Gencor Industries

Allowing for the 90-day total investment horizon Deere Company is expected to generate 0.46 times more return on investment than Gencor Industries. However, Deere Company is 2.19 times less risky than Gencor Industries. It trades about -0.33 of its potential returns per unit of risk. Gencor Industries is currently generating about -0.35 per unit of risk. If you would invest  45,750  in Deere Company on October 4, 2024 and sell it today you would lose (3,932) from holding Deere Company or give up 8.59% of portfolio value over 90 days.

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

Deere Company  vs.  Gencor Industries

Deere Company

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 2 (%) 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Gencor Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gencor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Deere and Gencor Industries

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

The idea behind Deere Company and Gencor Industries 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.