Correlation Between Deere and Porsche Automobil

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

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

Diversification Opportunities for Deere and Porsche Automobil

0.64

Correlation Coefficient

Deere  Porsche Automobil

Poor diversification

The 3 months correlation between Deere and Porsche is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Porsche Automobil Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porsche Automobil 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 Porsche Automobil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porsche Automobil Holding has no effect on the direction of Deere i.e., Deere and Porsche Automobil go up and down completely randomly.

Pair Corralation between Deere and Porsche Automobil

Allowing for the 90-day total investment horizon Deere Company is expected to generate 0.76 times more return on investment than Porsche Automobil. However, Deere Company is 1.32 times less risky than Porsche Automobil. It trades about 0.09 of its potential returns per unit of risk. Porsche Automobil Holding is currently generating about 0.02 per unit of risk. If you would invest  42,302  in Deere Company on December 28, 2024 and sell it today you would earn a total of  4,229  from holding Deere Company or generate 10.0% return on investment over 90 days.

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

Deere Company  vs.  Porsche Automobil Holding

Deere Company

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 7 (%) 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 April 2025.

Porsche Automobil Holding

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Porsche Automobil Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Porsche Automobil is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Deere and Porsche Automobil

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

The idea behind Deere Company and Porsche Automobil 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.