Correlation Between Deere and Air France
Can any of the company-specific risk be diversified away by investing in both Deere and Air France 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 Deere and Air France into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deere Company and Air France KLM, you can compare the effects of market volatilities on Deere and Air France 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 Deere with a short position of Air France. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deere and Air France.
Diversification Opportunities for Deere and Air France
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Deere and Air is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Air France KLM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air France KLM and Deere 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 Deere Company are associated (or correlated) with Air France. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air France KLM has no effect on the direction of Deere i.e., Deere and Air France go up and down completely randomly.
Pair Corralation between Deere and Air France
Allowing for the 90-day total investment horizon Deere is expected to generate 6.24 times less return on investment than Air France. But when comparing it to its historical volatility, Deere Company is 1.64 times less risky than Air France. It trades about 0.04 of its potential returns per unit of risk. Air France KLM is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 80.00 in Air France KLM on November 27, 2024 and sell it today you would earn a total of 7.00 from holding Air France KLM or generate 8.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Deere Company vs. Air France KLM
Performance |
| Timeline |
| Deere Company |
| Air France KLM |
Deere and Air France Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deere and Air France
The main advantage of trading using opposite Deere and Air France positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deere position performs unexpectedly, Air France 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 Air France will offset losses from the drop in Air France's long position.The idea behind Deere Company and Air France KLM 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.| Air France vs. International Consolidated Airlines | Air France vs. Air France KLM SA | Air France vs. Finnair Oyj | Air France vs. AirAsia Group Berhad |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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