Correlation Between Deere and Caldwell Partners
Can any of the company-specific risk be diversified away by investing in both Deere and Caldwell Partners 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 Caldwell Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deere Company and The Caldwell Partners, you can compare the effects of market volatilities on Deere and Caldwell Partners 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 Caldwell Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deere and Caldwell Partners.
Diversification Opportunities for Deere and Caldwell Partners
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Deere and Caldwell is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and The Caldwell Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caldwell Partners 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 Caldwell Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caldwell Partners has no effect on the direction of Deere i.e., Deere and Caldwell Partners go up and down completely randomly.
Pair Corralation between Deere and Caldwell Partners
Allowing for the 90-day total investment horizon Deere Company is expected to generate 0.54 times more return on investment than Caldwell Partners. However, Deere Company is 1.84 times less risky than Caldwell Partners. It trades about 0.22 of its potential returns per unit of risk. The Caldwell Partners is currently generating about 0.08 per unit of risk. If you would invest 41,235 in Deere Company on August 29, 2024 and sell it today you would earn a total of 4,869 from holding Deere Company or generate 11.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Deere Company vs. The Caldwell Partners
Performance |
| Timeline |
| Deere Company |
| Caldwell Partners |
Deere and Caldwell Partners Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deere and Caldwell Partners
The main advantage of trading using opposite Deere and Caldwell Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deere position performs unexpectedly, Caldwell Partners 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 Caldwell Partners will offset losses from the drop in Caldwell Partners' long position.The idea behind Deere Company and The Caldwell Partners 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.| Caldwell Partners vs. Deere Company | Caldwell Partners vs. Columbus McKinnon | Caldwell Partners vs. Hyster Yale Materials Handling | Caldwell Partners vs. Manitowoc |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume |