Correlation Between STMicroelectronics and Deere

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

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

Diversification Opportunities for STMicroelectronics and Deere

-0.15

Correlation Coefficient

STMicroelectronics  Deere

Good diversification

The 3 months correlation between STMicroelectronics and Deere is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and STMicroelectronics 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 STMicroelectronics NV 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 STMicroelectronics i.e., STMicroelectronics and Deere go up and down completely randomly.

Pair Corralation between STMicroelectronics and Deere

Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the Deere. In addition to that, STMicroelectronics is 1.88 times more volatile than Deere Company. It trades about -0.03 of its total potential returns per unit of risk. Deere Company is currently generating about 0.1 per unit of volatility. If you would invest  40,963  in Deere Company on December 26, 2024 and sell it today you would earn a total of  3,842  from holding Deere Company or generate 9.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

STMicroelectronics NV  vs.  Deere Company

STMicroelectronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days STMicroelectronics NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, STMicroelectronics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Deere Company

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Deere may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with STMicroelectronics and Deere

The main advantage of trading using opposite STMicroelectronics and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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 STMicroelectronics NV 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.