Correlation Between Deere and Textainer Group

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

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

Diversification Opportunities for Deere and Textainer Group

-0.03

Correlation Coefficient

Deere  Textainer Group

Good diversification

The 3 months correlation between Deere and Textainer is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Textainer Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textainer Group Holdings 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 Textainer Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textainer Group Holdings has no effect on the direction of Deere i.e., Deere and Textainer Group go up and down completely randomly.

Pair Corralation between Deere and Textainer Group

Allowing for the 90-day total investment horizon Deere is expected to generate 1.29 times less return on investment than Textainer Group. But when comparing it to its historical volatility, Deere Company is 2.28 times less risky than Textainer Group. It trades about 0.1 of its potential returns per unit of risk. Textainer Group Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Textainer Group Holdings on September 17, 2024 and sell it today you would earn a total of  7.00  from holding Textainer Group Holdings or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Deere Company  vs.  Textainer Group Holdings

Deere Company

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 8 (%) 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 January 2025.

Textainer Group Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Textainer Group Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Textainer Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deere and Textainer Group

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

The idea behind Deere Company and Textainer Group Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.