Correlation Between GOLD ROAD and Deere

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

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

Diversification Opportunities for GOLD ROAD and Deere

0.61

Correlation Coefficient

GOLD ROAD  Deere

Poor diversification

The 3 months correlation between GOLD and Deere is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding GOLD ROAD RES and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and GOLD ROAD 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 GOLD ROAD RES are associated (or correlated) with Deere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deere Company has no effect on the direction of GOLD ROAD i.e., GOLD ROAD and Deere go up and down completely randomly.

Pair Corralation between GOLD ROAD and Deere

Assuming the 90 days trading horizon GOLD ROAD RES is expected to generate 1.24 times more return on investment than Deere. However, GOLD ROAD is 1.24 times more volatile than Deere Company. It trades about 0.2 of its potential returns per unit of risk. Deere Company is currently generating about 0.14 per unit of risk. If you would invest  114.00  in GOLD ROAD RES on October 25, 2024 and sell it today you would earn a total of  35.00  from holding GOLD ROAD RES or generate 30.7% return on investment over 90 days.

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

GOLD ROAD RES  vs.  Deere Company

GOLD ROAD RES

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GOLD ROAD RES are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, GOLD ROAD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Deere Company

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Deere unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GOLD ROAD and Deere

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

The idea behind GOLD ROAD RES and Deere Company 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.