Correlation Between Manitowoc and Deere

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

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

Diversification Opportunities for Manitowoc and Deere

0.43

Correlation Coefficient

Manitowoc  Deere

Very weak diversification

The 3 months correlation between Manitowoc and Deere is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Manitowoc and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and Manitowoc 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 Manitowoc 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 Manitowoc i.e., Manitowoc and Deere go up and down completely randomly.

Pair Corralation between Manitowoc and Deere

Considering the 90-day investment horizon Manitowoc is expected to under-perform the Deere. But the stock apears to be less risky and, when comparing its historical volatility, Manitowoc is 1.11 times less risky than Deere. The stock trades about -0.18 of its potential returns per unit of risk. The Deere Company is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  39,375  in Deere Company on September 13, 2024 and sell it today you would earn a total of  4,645  from holding Deere Company or generate 11.8% return on investment over 90 days.

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

Manitowoc  vs.  Deere Company

Manitowoc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Manitowoc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Manitowoc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Deere Company

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 10 (%) 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.

Pair Trading with Manitowoc and Deere

The main advantage of trading using opposite Manitowoc and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manitowoc 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 Manitowoc 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.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .