Correlation Between Daimler Truck and AGCO

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

By analyzing existing cross correlation between Daimler Truck Holding and AGCO Corporation, you can compare the effects of market volatilities on Daimler Truck and AGCO 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 Daimler Truck with a short position of AGCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daimler Truck and AGCO.

Diversification Opportunities for Daimler Truck and AGCO

0.32

Correlation Coefficient

Daimler Truck  AGCO

Weak diversification

The 3 months correlation between Daimler and AGCO is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Daimler Truck Holding and AGCO Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGCO and Daimler Truck 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 Daimler Truck Holding are associated (or correlated) with AGCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGCO has no effect on the direction of Daimler Truck i.e., Daimler Truck and AGCO go up and down completely randomly.

Pair Corralation between Daimler Truck and AGCO

Assuming the 90 days horizon Daimler Truck is expected to generate 5.24 times less return on investment than AGCO. But when comparing it to its historical volatility, Daimler Truck Holding is 1.03 times less risky than AGCO. It trades about 0.02 of its potential returns per unit of risk. AGCO Corporation is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9,370  in AGCO Corporation on September 16, 2024 and sell it today you would earn a total of  342.00  from holding AGCO Corporation or generate 3.65% return on investment over 90 days.

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

Daimler Truck Holding  vs.  AGCO Corp.

Daimler Truck Holding

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daimler Truck Holding are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Daimler Truck showed solid returns over the last few months and may actually be approaching a breakup point.

AGCO

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AGCO Corporation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, AGCO may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Daimler Truck and AGCO

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

The idea behind Daimler Truck Holding and AGCO Corporation 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..