Correlation Between Deere and Energous

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

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

Diversification Opportunities for Deere and Energous

-0.67

Correlation Coefficient

Deere  Energous

Excellent diversification

The 3 months correlation between Deere and Energous is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Energous in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energous 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 Energous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energous has no effect on the direction of Deere i.e., Deere and Energous go up and down completely randomly.

Pair Corralation between Deere and Energous

Allowing for the 90-day total investment horizon Deere Company is expected to generate 0.39 times more return on investment than Energous. However, Deere Company is 2.55 times less risky than Energous. It trades about 0.19 of its potential returns per unit of risk. Energous is currently generating about -0.17 per unit of risk. If you would invest  38,433  in Deere Company on September 2, 2024 and sell it today you would earn a total of  8,157  from holding Deere Company or generate 21.22% return on investment over 90 days.

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

Deere Company  vs.  Energous

Deere Company

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 15 (%) 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.

Energous

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energous has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Deere and Energous

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

The idea behind Deere Company and Energous 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..