Correlation Between Visa and Deere

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

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

Diversification Opportunities for Visa and Deere

0.8

Correlation Coefficient

Visa  Deere

Very poor diversification

The 3 months correlation between Visa and Deere is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and Visa 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 Visa Class A 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 Visa i.e., Visa and Deere go up and down completely randomly.

Pair Corralation between Visa and Deere

Taking into account the 90-day investment horizon Visa is expected to generate 1.07 times less return on investment than Deere. But when comparing it to its historical volatility, Visa Class A is 1.74 times less risky than Deere. It trades about 0.14 of its potential returns per unit of risk. Deere Company is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  44,605  in Deere Company on December 4, 2024 and sell it today you would earn a total of  1,240  from holding Deere Company or generate 2.78% return on investment over 90 days.

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

Visa Class A  vs.  Deere Company

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Deere Company

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Deere may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Visa and Deere

The main advantage of trading using opposite Visa and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.