Correlation Between Deere and Smart Powerr
Can any of the company-specific risk be diversified away by investing in both Deere and Smart Powerr 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 Smart Powerr into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deere Company and Smart Powerr Corp, you can compare the effects of market volatilities on Deere and Smart Powerr 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 Smart Powerr. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deere and Smart Powerr.
Diversification Opportunities for Deere and Smart Powerr
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Deere and Smart is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Smart Powerr Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Powerr Corp 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 Smart Powerr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Powerr Corp has no effect on the direction of Deere i.e., Deere and Smart Powerr go up and down completely randomly.
Pair Corralation between Deere and Smart Powerr
Allowing for the 90-day total investment horizon Deere Company is expected to generate 0.54 times more return on investment than Smart Powerr. However, Deere Company is 1.86 times less risky than Smart Powerr. It trades about 0.39 of its potential returns per unit of risk. Smart Powerr Corp is currently generating about -0.1 per unit of risk. If you would invest 41,800 in Deere Company on November 5, 2024 and sell it today you would earn a total of 5,856 from holding Deere Company or generate 14.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Deere Company vs. Smart Powerr Corp
Performance |
| Timeline |
| Deere Company |
| Smart Powerr Corp |
Deere and Smart Powerr Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deere and Smart Powerr
The main advantage of trading using opposite Deere and Smart Powerr positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deere position performs unexpectedly, Smart Powerr 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 Smart Powerr will offset losses from the drop in Smart Powerr's long position.The idea behind Deere Company and Smart Powerr Corp 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.| Smart Powerr vs. Verde Clean Fuels | Smart Powerr vs. Ormat Technologies | Smart Powerr vs. Tokyo Electric Power | Smart Powerr vs. Verde Clean Fuels |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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