Correlation Between Deere and Surge Components

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

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

Diversification Opportunities for Deere and Surge Components

0.23

Correlation Coefficient

Deere  Surge Components

Modest diversification

The 3 months correlation between Deere and Surge is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Surge Components in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surge Components 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 Surge Components. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surge Components has no effect on the direction of Deere i.e., Deere and Surge Components go up and down completely randomly.

Pair Corralation between Deere and Surge Components

Allowing for the 90-day total investment horizon Deere is expected to generate 27.14 times less return on investment than Surge Components. In addition to that, Deere is 1.25 times more volatile than Surge Components. It trades about 0.0 of its total potential returns per unit of risk. Surge Components is currently generating about 0.05 per unit of volatility. If you would invest  227.00  in Surge Components on December 4, 2024 and sell it today you would earn a total of  3.00  from holding Surge Components or generate 1.32% return on investment over 90 days.

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

Deere Company  vs.  Surge Components

Deere Company

Risk-Adjusted Performance

Weak

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Surge Components

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Surge Components are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Surge Components is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Deere and Surge Components

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

The idea behind Deere Company and Surge Components 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.