Correlation Between Deere and Ideanomics

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

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

Diversification Opportunities for Deere and Ideanomics

-0.79

Correlation Coefficient

Deere  Ideanomics

Pay attention - limited upside

The 3 months correlation between Deere and Ideanomics is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Ideanomics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ideanomics 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 Ideanomics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ideanomics has no effect on the direction of Deere i.e., Deere and Ideanomics go up and down completely randomly.

Pair Corralation between Deere and Ideanomics

Allowing for the 90-day total investment horizon Deere is expected to generate 655.5 times less return on investment than Ideanomics. But when comparing it to its historical volatility, Deere Company is 179.23 times less risky than Ideanomics. It trades about 0.12 of its potential returns per unit of risk. Ideanomics is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest  0.36  in Ideanomics on December 29, 2024 and sell it today you would earn a total of  5.14  from holding Ideanomics or generate 1427.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	54.1%
Values	Daily Returns

Deere Company  vs.  Ideanomics

Deere Company

Risk-Adjusted Performance

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 exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ideanomics

Risk-Adjusted Performance

Very Strong

Over the last 90 days Ideanomics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unsteady technical and fundamental indicators, Ideanomics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deere and Ideanomics

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

The idea behind Deere Company and Ideanomics 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.