Correlation Between Marijuana and Deere

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

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

Diversification Opportunities for Marijuana and Deere

-0.53

Correlation Coefficient

Marijuana  Deere

Excellent diversification

The 3 months correlation between Marijuana and Deere is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Marijuana and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and Marijuana 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 Marijuana 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 Marijuana i.e., Marijuana and Deere go up and down completely randomly.

Pair Corralation between Marijuana and Deere

Given the investment horizon of 90 days Marijuana is expected to generate 111.4 times more return on investment than Deere. However, Marijuana is 111.4 times more volatile than Deere Company. It trades about 0.17 of its potential returns per unit of risk. Deere Company is currently generating about 0.04 per unit of risk. If you would invest  0.01  in Marijuana on September 12, 2024 and sell it today you would lose (0.01) from holding Marijuana or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.4%
Values	Daily Returns

Marijuana  vs.  Deere Company

Marijuana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marijuana has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 rather weak technical and fundamental indicators, Deere exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marijuana and Deere

The main advantage of trading using opposite Marijuana and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marijuana 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 Marijuana 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.